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Indiana Law 



The Honorable Chief Justice Randall T. Shepard 

Joseph R. Alberts 

Jennifer Andres 

Bryan H. Babb 

Kellie M. Barr 

Matthew T. Black 

Christopher A. Brown 

Daniel K. Burke 

Tom D. Conley 

Mark J. Crandley 

Michael A. Dorelli 

Hall, Render, Killian, Heath & Lyman, P.C 

Lawrence A. Jegen, III 

Charles M. Kidd 

Angela Krahulik 

Jon Laramore 

James Petersen 

Marci A. Reddick 

Joel M. Schumm 

Richard K. Shoultz 

Freedom S.N. Smith 

P. Jason Stephenson 

Jennifer Wheeler Terry 

Robert B. Thornburg 

Danielle B. Tucker 





Volume 42 No. 4 


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Indiana Law Review 

Volume 42 



Jonathan Hughes 

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Indiana Law Review 

(ISSN 0090-4198) 

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Indiana Law Review 

Volume 42 2009 Number 4 

Copyright © 2009 by the Trustees of Indiana University 



I. Introduction 

The Changing Nature of Judicial Leadership 

Randall T. Shepard 767 

II. Supreme Court Review 

An Examination of the Indiana Supreme Court Docket, 
Dispositions, and Voting in 2008 

Mark J. Crandley 113 
P. Jason Stephenson 

III. Administrative Law 

Survey of Indiana Administrative Law 

Jennifer Wheeler Terry 789 

IV. Appellate Procedure 

Developments in Indiana Appellate Procedure: Rule 
Amendments, Notable Case Law, and Tips for Appellate 

Bryan H.Babb 813 
Kellie M. Barr 

V. Business and Contract Law 

Recent Developments in Indiana Business and 
Contract Law 

Michael A. Dorelli 847 

VI. Civil Procedure 

Recent Developments in Indiana Civil Procedure 

Daniel K. Burke 879 

VII. Constitutional Law 

Indiana Constitutional Developments: Evolution on 
Individual Rights 

Jon Laramore 909 

VIII. Criminal Law and Procedure 

Recent Developments in Indiana Criminal Law and 

Joel M. Schumm 937 

IX. Environmental Law 

2007-2008 Environmental Law Survey: A System in Flux 

Freedom S.N. Smith 973 
Jennifer Andres 
Angela Krahulik 

X. Health Care Law 

Survey of Recent Developments in Health Care Law 

Hall, Render, Killian, Heath & Lyman, P.C. 1003 

XL Insurance Law 

Survey of Recent Developments in Insurance Law 

Richard K. Shoultz 1055 

XII. Intellectual Property Law 

Recent Developments in Intellectual Property Law 

Christopher A. Brown 1071 

XIII. Product Liability 

Survey of Recent Developments in Indiana Product 
Liability Law 

Joseph R. Alberts 1093 
James Petersen 
Robert B. Thomburg 

XIV. Professional Responsibility 

2008 Survey of the Law of Professional Responsibility 

Charles M. Kidd 1167 

XV. Property Law 

Recent Developments in Indiana Real Property Law 

Marci A. Reddick 1 1 87 
Danielle B. Tucker 

XVI. Taxation 

Recent Developments in Indiana Taxation Survey 2009 

Lawrence A. J e gen, 111 1215 
Matthew T. Black 
TomD. Conley 

Volume 42 Number 4 

The Changing Nature of Judicial Leadership 

Randall T. Shepard* 

When we think about leadership in the legal profession, the work of lawyers 
and, particularly, the work of bar associations come most often to our mind. We 
have tended to think of leadership in the judicial sense by reference to the cases 
decided or the jurisprudence developed by individual judges through the 
decisions of appellate tribunals. 

In the twenty-first century, the judicial members of the legal profession have 
begun to view leadership in ways beyond the jurisprudence that flows from 
individual cases. Increasingly, judges have been taking responsibility for the 
overall health of the judicial institution and for its effectiveness at dispensing 
substantial justice in the society that relies on us for doing that. 

This essay focuses on ways in which leadership occurs in the modem or 
recent judiciary, as a way of exploring how we might go about building stronger 
institutions and a more effective system of justice. I will do that by examining 
four dimensions of modem judicial leadership. 

I. Putting THE Institution ON THE Line 

To be sure, there are occasions when the demand for extraordinary judicial 
leadership arises in the context of litigation. The leading example is a very 
familiar story about a moment in history. The 1954 decision in Brown v. Board 
of Education (Brown 7)^ is rightly regarded as the seminal event in the nation's 
great civil rights era. Anyone with more than a passing knowledge of Brown I 
knows about the central role of the remarkable litigation team led by Thurgood 
Marshall and his associates at the NAACP. Those lawyers developed just the 
right case and chose just the right moment. 

The Supreme Court, of course, overmled Plessey v. Ferguson^ and held that 
separate could not possibly be equal. ^ It ordered schools to be de-segregated in 
dozens of states, including the northem state of Kansas that gave the case its 
caption."^ We think of the Brown I moment in American history as one of the 
great counter-majoritarian judicial acts. 

To be sure, the lawyers were cmcial to the event, but so were the members 
of the Supreme Court and, particularly, the Court's leader, Chief Justice Earl 
Warren. Many people can still remember and very occasionally still see bams 
painted with "Impeach Earl Warren" as a result of this decision. Contemplate for 
a moment why it mattered so much that Chief Justice Warren managed to 

* Chief Justice of Indiana. A.B., 1969, Princeton University; J.D., 1972, Yale Law School; 
LL.M., 1995, University of Virginia School of Law. I thank Dean Gerald L. Bepko of Indiana 
University for prompting me to put these thoughts in print. 

1. 347 U.S. 483 (1954). 

2. 163 U.S. 537(1896). 

3. fiwwn 7,347 U.S. at 494-95. 

4. Id. at 495; see also Brown v. Bd. of Educ. {Brown IF), 349 U.S. 294, 300-01 (1955) 
(ordering that schools desegregate). 

768 INDIANA LAW REVIEW [Vol. 42:767 

engineer a unanimous decision in Brown.^ It was not at all preordained that this 
would occur. Diaries and notes revealed long afterwards indicate that there was 
every chance that the case would have been decided on the basis of a very 
divided vote.^ It was the political savvy of former Governor Warren that 
managed to produce a unanimous decision.^ It speaks the obvious to say that the 
fact that the decision was unanimous made all the difference in the world as 
respects how Brown v. Board of Education would be received by the public and 
how it would be enforced. It helped enormously, of course, that President 
Eisenhower ultimately sent the 1 1 st Airborne Division to Little Rock to enforce 
the order of the Supreme Court. It was a skillful choice made by a President who 
knew that the public remembered the 101st for its heroic deeds during World 
War n. He knew that Americans would respond better to the sight of heroes on 
duty to enforce the rule of law.^ One need only pause but briefly to imagine what 
the aftermath of the Brown decision might have been like had the Supreme Court 
decided the case on a divided vote with accompanying concurrences and dissents. 
One might make a similar point about the case involving President Richard 
M. Nixon and the Watergate tapes. We have known for a long time that Chief 
Justice Warren Burger, realizing that the case would go against the very 
President who had placed him in the nation's highest judicial office, worked 
every day, two weeks straight, to assemble an opinion that might command 
unanimity.^ He had taken the assignment himself, and his commitment to a 
unanimous decision was so strong that he ended up issuing an opinion that did 
not actually reflect his own legal views about why the President should lose the 
case.^^ President Nixon had contemplated not complying if he lost,'^ perhaps 
following Andrew Jackson' s approach as respects the Cherokees. When his chief 
of staff told him the Court' s opinion was "tight as a drum," Nixon decided to turn 

5 . See Melvin I. Urofsky, "Among the Most Humane Moments in All Our History ": Brown 
V. Board of Education in Historical Perspective, in BLACK WHITE, AND Brown: The LANDMARK 
School Desegregation Case IN Retrospect 1, 25 (Clare Cushman & Melvin I. Urofsky eds., 

6. See Earl Warren, The Memoirs of Earl Warren 281-86 (1977); see also John D. 
Fassett, A Plea for the Demise of a Stubborn Myth, in BLACK, WHITE, ANDBrown: The LANDMARK 
School Desegregation Case IN Retrospect 1 17, 123-27 (Clare Cushman & Melvin L Urofsky 
eds., 2004). 

7. See Urofsky, supra note 5, at 20-21, 26. 

8. President Eisenhower's actions stood in marked contrast to Andrew Jackson's response 
to the Supreme Court's ruling on discrimination against the Cherokees. Jackson's modem fans 
express skepticism that he actually said, "John Marshall has made his decision, now let him enforce 
it." What is important, however, is that President Jackson did not in fact enforce the Court's 
decision. See JOHN Meacham, AMERICAN LiON: ANDREW JACKSON IN THE White House 203-04 

9. See Bob Woodward & Scott Armstrong, The Brethren: Inside the Supreme 
Court 310-46 (1979). 

10. For an early but fulsome account of these events, see id. at 287-347. 

11. /J. at 347. 


over the tapes. ^^ 

While we have not experienced any of these titanic moments on a national 
level in recent decades, it is easy enough to identify occasions when various state 
courts confronted similar dynamics under important circumstances. Perhaps the 
most prominent illustrations are the school finance cases brought in states like 
Ohio,^^ Kentucky,'"^ and Texas. ^^ In each of these, litigants asked the state 
supreme court to determine that the existing method of financing education did 
not comply with guarantees contained in the state constitution, guarantees quite 
common in state constitution but without any analog in the Constitution of the 
United States. ^^ Among the significant features of these cases was the continued 
volley back and forth between the political branches of those states and the 
state's highest court, as legislators and governors sought out solutions that might 
be held satisfactory by a majority of the state supreme court. 

Indiana's recent moment of great tension was the challenge to Secretary of 
State Evan Bayh's candidacy for Governor on the basis that he had not been a 
resident of the state long enough to qualify under the Indiana Constitution.^^ A 
court of four Republican justices and one Democrat voted unanimously that Evan 
Bayh met the legal standard. ^^ To his credit, the sitting Governor of the State, 

12. Id. 

13. DeRolph v. State, 677 N.E.2d 733, 737 (Ohio 1997) (finding that the school financing 
system violated state constitutional guarantee of a "thorough and efficient system of common 

14. Rose V. Council for Better Educ, Inc., 790 S.W.2d 186,215 (Ky. 1989) (finding that the 
existing school system did not provide "an efficient system of common schools" as required by the 
state constitution). 

15. The Texas Supreme Court appears to hold the record for decisions invalidating school 
finance arrangements. For the latest of these, see generally Neeley v. West Orange-Cove 
Consolidated Independent School District, 176 S.W.3d 746 (Tex. 2005). 

16. For these state constitutional provisions, see Ala. Const, art. XIV, § 256; ALASKA 
Const, art. VII, § 1; .\riz. Const, art. XIV, § 1; Cal. Const, art. IX, § 5; Colo. Const, art. IX, 
§ 2; Conn. Const, art. VIII, § 1 ; Del. Const, art. X, § 1 ; Fla. Const, art. IX, § 1 ; Ga. Const, art. 
VIII, §1,^1; Haw. Const, art. X, § 1; Idaho Const, art. IX, § 1; III. Const, art. X, § 1; Ind. 
Const, art. VIII, § l;,2d, §3; VI, § 1; KY. Const. § 183; La. 
Const, art. VIII, § 1; Me. Const, art. VIII, pt. 1, § 1; Md. Const, art. VIII, § 1; Mass. Const, pt. 
2, ch. 5, § 2; MiCH. CONST, art. VIII, § 2; MiNN. Const, art. XIII, § 1; MiSS. CONST, art. VIII, § 
201; Mo. Const, art. IX, § 1(a); Mont. Const, art. X, § 1; Neb. Const, art. VII, § 1; Nev. Const. 
art. XI, § 2; N.H. Const, pt. 2, art. LXXXIII; N.J. Const, art. VIII, § 4, S[ 1 ; N.M. Const, art. XII, 
§ 1; N.Y. Const, art. XI, § 1; N.C. Const, art. IX, § 2; N.D. Const, art. VIII, § 2; OfflO Const. 
art. VI, § 2; Okla. Const, art. XIII, § 1; Or. Const, art. VIII, § 3; Pa. Const, art. Ill, § 14; R.I. 
Const, art. XII, § 1; S.C. Const, art. XI, § 3; S.D. Const, art. VIII, § 1; Tenn. Const, art. XI, § 
12; Tex. Const, art. VII, § 1; Utah Const, art. X, § 1; Vt. Const, ch. 2, § 68; Va. Const, art. 
VIII, § 1; Wash. Const, art. IX, § 2; W. Va. Const, art. XII, § 1; Wis. Const, art. X, § 3; Wyo. 
Const, art. VII, § 1. 

17. State Election Bd. v. Bayh, 521 N.E.2d 1313, 1314 (Ind. 1988). 

18. Id. at 1314-18. 

770 INDIANA LAW REVIEW [Vol. 42:767 

Robert D. Orr, responded to the court's decision by saying that he was pleased 
the issue had been put to rest. Surely his reaction and the reaction of others 
would have been different had there been a divided vote. 

At junctures such as these, the rectitude and authority of the judiciary is 
plainly on the line. Judicial leadership requires assessing the court's role in the 
larger context of democratic self-government, weighing its destiny as against the 
other mechanisms of self-government, and moving in a wise direction. 

n. Building the Institution 

Perhaps eighteen months ago at a small dinner of chief justices and state 
court administrators held in Cambridge, Massachusetts, Chief Justice Margaret 
Marshall invited those around the table to think for a moment about "who was 
a great Chief Justice of the United States," limiting the choices to three possible 
answers: Earl Warren, Warren Burger and William Rehnquist. She asked each 
of us to cast but one vote. The largest number of votes went to Earl Warren, with 
William Rehnquist running a respectable second, and Warren Burger receiving 
none. Chief Justice Marshall said this result was typical of other occasions when 
she had asked the same question, but argued that this division of the house did 
not fairly credit the contributions of Warren Burger. 

She pointed out that Warren Burger had accomplished a great deal to enable 
the federal judiciary to conduct its work in a modem and effective way. He had 
much improved relationships between the courts and the Congress, and he had 
persuaded the legislative branch to approve better budgets for the federal 
judiciary . ^^ This campaign produced better staff and law clerk support and better 
physical working conditions. ^^ The great federal court building boom 
commenced while Burger was Chief Justice,^^ leading to the phenomenally 
improved federal court facilities that the nation enjoys today. He likewise 
inspired creation of the National Center for State Courts, the principle court 
reform body and innovation vehicle aimed at those courts where most Americans 
go in search of justice.^^ 

Efforts of a similar sort by Indiana' s trial and appellate court leaders have 
produced a good many happy results. In the $100 million or so budget of the 
Indiana Supreme Court, there are now nearly $20 million appropriated annually 
for improvements to the state' s trial courts — all the way from revolutionizing the 
use of technology to upgrading local public defender services to supplying 
qualified interpreter services in the county courthouses. There is every reason 
to believe that this trend will continue. Part of this progress has flowed simply 
from paying attention to the mechanics of how the state budget is assembled and 
adopted, and part of it is the product of work by judges in educating legislators 

19. Earl M. Maltz, The CHffiF Justiceship of Warren Burger 1969-1986, at 10-11 

20. Id. at 10. 

21. Mat 11. 

22. Id. 


on how additions to the state budget can make justice work better in their own 

in. Spending Capital on the Big Project 

Observing the activities of a state officeholder some years ago, a friend of 
mine said that the officeholder seemed to be running for something but did not 
know what it was yet. This was meant to refer to a rather common human trait 
of accumulating credibility and capital with other people without necessarily 
knowing when or on what topic one might need to use it. 

One usually needs to use it when something really big demands to be done. 
A very early example of this was the willingness of Chief Justice Taft to commit 
himself early in the twentieth century to step out of his regular role and lead in 
creation of the country's first code of ethics for judges. ^^ Yet another example 
was the willingness of Justice Robert Jackson to step out of his role as 
adjudicator to accept President Harry Truman's entreaty that he become one of 
the prosecutors at the Nuremburg war crimes trials. ^"^ A third example is the 
willingness of Earl Warren to serve as chairman of the President's Commission 
on the Assassination of President Kennedy. ^^ Indeed, as so often happens, it was 
Warren as chair who gave the Commission its very name in the minds of most 
Americans. A much more modest, but similar example was my decision to 
accept Governor Mitch Daniels' request that I join with former Governor Joe 
Keman and others to devise a series of improvements in local government 
structures and services (including those of Indiana's trial courts). Being careful 
not to end up violating the Code of Judicial Conduct myself, I asked that the 
endeavor be organized in a way that did not cross any of those lines. 

Each of these reflects a moment when a member of the judicial family is 
called upon to play roles which are not strictly a part of the classic adjudicative 
function but reflect instead the exercise of leadership in other ways, like lending 
a part of the credibility the judicial branch acquires over time to a very important 
undertaking that society needs. I would be the first to say that these moments 
must be few and far between, less they detract from our principal obligations. In 
the long run, though, they represent a way that judges can sometimes contribute 
to building a more decent safe and prosperous society. 

rv. Trial Court Leadership 

While many of the preceding examples have reflected work of appellate court 
judges, particularly the work of the leaders of courts of last resort, there are also 
a host of examples of changes that have been made by trial court judges or 
members of intermediate appellate courts. 

Judge John L. Kellam of the Henry Circuit Court has been an indefatigable 

23. See Final Report and Proposed Canons of Judicial Ethics, 9 A.B.A. J. 449, 449 ( 1 923). 


25. See generally G. EDWARD WHITE, Earl Warren: A Public Life 190-213 (1984) 
(discussing Chief Justice Warren's role on the aptly named "Warren Commission"). 

772 INDIANA LAW REVIEW [Vol. 42:767 

reformer in a wide variety of fields. He laid out his vision of trial court 
organization in this law review.^^ He set the Indiana court system on a path we 
still tread today. 

In a variety of senses the Chief Judge of the Indiana Court of Appeals, John 
G. Baker, began his leadership of court reform while serving as a trial judge in 
the Monroe Superior Court. Most people would say that Judge Baker's 
leadership of the group of judges in Monroe County was a leading factor in 
creating a unified court there. Moreover, he and his colleagues proved to other 
trial judges that this was an effective and convenient way of building better 
courts at the local level. 

Another example is the work Judge William Miller of the Vanderburgh 
Circuit Court did during the 1980' s to create alternatives to incarceration. Judge 
Miller's activities on drug and alcohol programs, work release, and other 
corrections methods were very much a forerunner of today's ubiquitous 
movement we now call 'Troblem Solving Courts." 

I might mention one other trial judge whom I know. Judge Michael Dann, 
now retired from the courts in Arizona. While a student in the Master of Laws 
program at the University of Virginia School of Law, Judge Dann chose to 
examine and formulate ideas for improving the way American courts conduct 
jury trials. He made proposals on everything from recruiting a representative 
venire to re-empowering jurors to decide cases in the way that adults actually 
decide important matters in real life.^^ It is not too much to say that Judge 
Dann's work as a trial court judge in Arizona ultimately spawned a national 
movement which prompted dramatic changes from Arizona to New York, and of 
course here in Indiana. ^^ 


A society's institutions either grow and adapt, or wither and get bypassed. 
Just as the adjudicating judge long ago ceased being the passive non-manager of 
litigation, today's judge must take interest and responsibility for building better 
systems of justice. 

26. John L. Kellam, The Indiana Judicial System: An Analysis of Change, 21 IND. L, Rev. 
273 (1988). 

27. See generally B. Michael Dann, Jury Reform: The Arizona Experience, 79 JUDICATURE 
280 (1996) (discussing jury research and reform). 

28. See generally Randall T. Shepard, Jury Trials Aren 't What They Used to Be, 38 iND. L. 
Rev. 859 (2005). 

An Examination of the 
Indiana Supreme Court Docket, 
Dispositions, and Voting in 2008* 

Mark J. Crandley** 
P. Jason Stephenson*** 

Unlike the United States Supreme Court, there is generally no means of 
predicting how a justice of the Indiana Supreme Court will vote in a given case 
based on ideological doctrine or political worldview. As this Article has shown 
over a number of years, there are no clear, predictable voting blocks on the court 
and no template for determining how a particular justice or group of justices will 
vote in any particular case or type of case. This lack of voting blocks typically 
means that the court's statistics in any given year will be driven by the particular 
cases that come before it during that year. The court's voting statistics therefore 
can sway in unexpected ways from year to year. In that vein, 2008 was no 
exception. The court's caseload for 2008 serves as another good example of the 
lack of ideological voting blocks on the court and the uncertainty that litigants 
that come before the court can face because of the justice's lack of dogma. 

First, the primary lesson practitioners should learn from the swings in the 
court's voting patterns in 2008 is that they likely cannot predict the result of a 
case simply because the court granted transfer. It has typically been true that if 
the court grants transfer, it is likely to reverse. For instance, in 2007 it affirmed 
only 6.4% of civil transfer cases and reversed all other civil cases. In 2008, this 
assumption did not hold true. Instead, the court affirmed 20% of its civil transfer 
cases. In many of these cases, the court appeared to exercise its discretion to take 
transfer to place its own stamp on an area of law despite the court's agreement 
with the result reached by the lower courts. The obvious purpose of transfer in 
these cases was not necessarily to reverse a bad result, but to allow the court to 
speak on important issues. These cases are an important lesson for practitioners 
seeking transfer from the court, as they demonstrate that focus on the result 

* The Tables presented in this Article are patterned after the annual statistics of the U.S. 
Supreme Court published in the Harvard Law Review. An explanation of the origin of these Tables 
can be found at Louis Henkin, The Supreme Court, 1967 Term, 82 Harv. L. Rev. 63, 301-02 
(1968). The Harvard Law Review granted permission for the use of these Tables by the Indiana 
Law Review this year; however, permission for any further reproduction of these Tables must be 
obtained from the Harvard Law Review. 

We thank Barnes & Thomburg for its gracious willingness to devote the time, energy, and 
resources of its law firm to allow a project such as this to be accomplished. As is appropriate, 
credit for the idea for this project goes to Chief Justice Shepard. Many thanks to Kevin Betz, who 
initially developed this article and worked hard to bring it to fruition in years past. The authors also 
must recognize Donald Click (Mr. Stephenson's father-in-law) who spent Thanksgiving Day 
writing the spreadsheet that compiled the statistics. 

** Partner, Barnes & Thomburg LLP, 2005-present; Assistant Corporation Counsel, City 
of Indianapolis, 2004-2005. Law clerk for Justice Frank Sullivan, Jr., Indiana Supreme Court, 
2000-2001. B.A., 1995, Indiana University; J.D., summa cum laude, 2000, Indiana University 
School of Law — Bloomington. 

*** Partner, Barnes & Thomburg LLP, 1999-present. B.A., 1996, Taylor University; J.D., 
1999, Indiana University School of Law — Indianapolis. 

774 INDIANA LAW REVIEW [Vol. 42:773 

below is not the only (or even main) consideration the court will give in 
exercising its power to grant transfer. 

Second, the court' s lack of voting blocks means the more sensitive issues that 
come before the court are addressed with intellectual rigor but do not devolve 
into the sniping that can often occur in courts of last resort. This is true even 
when the court ultimately enters a fractured opinion with different justices 
reaching very different results. For instance, in 2008, the court handed down 
scores of opinions that addressed questions of first impression on sensitive, 
divisive legal and social issues. These include issues such as the scope of liability 
under Indiana's RICO statute;^ the claimed constitutional right to a court- 
financed interpreter;^ the high-profile, politically tinged dispute regarding the 
effectiveness of arrests made after merger of the Indianapolis police department 
with the Marion County sheriff;^ the amount of force a parent may use in 
disciplining a child;"^ the scope of premise liability as applied to children;^ 
whether a criminal defendant can waive the right to appeal a discretionary 
sentence as part of a plea deal;^ and whether postings on could 
amount to harassment and subject a juvenile to a delinquency finding.^ In almost 
all of these cases, at least one justice issued a concurring or dissenting opinion. 
Although these issues were hotly contested, the tone of the court's opinions never 
wavered from the statesmanship the justices typically employ. 

Third, the lack of voting blocks means the level alignment between the 
individual justices can experience wild swings from year to year. The justices 
showed a remarkable lack of agreement in 2008, as only two justices agreed more 
than 80% of time in civil cases. In 2007, there were only three pairings of 
justices that agreed with each other less than 80% of the time. A similar swing 
occurred in criminal cases. In 2008, no two justices agreed more than 86% of the 
time in criminal cases, and several justices agreed less than 75% of the time. 
However, just one year ago, ^v^ry justice agreed with all others in at least 86% 
of the time in criminal cases. Perhaps most tellingly, 2008 presented a wild 
swing in the alignments among the justices when considering both criminal and 
civil cases together. In 2008, there were only two pairs of justices who agreed 
in more than 80% of all cases. In 2007, all of the justices agreed with all other 
justices more than 80% of the time for all cases. 

The same swings exist when looking at the alignment between individual 
justices. For instance, in 2007, Justices Sullivan and Rucker were the most 
aligned in civil cases at 91.4%. In 2008, they were among the least aligned at 
78.4%. Similarly, in prior years this Article has commented on the somewhat 
consistent alignment between Chief Justice Shepard, Justice Boehm, and Justice 

1. Keesling v. Beegle, 880 N.E.2d 1202 (Ind. 2008). 

2. Arrieta v. State, 878 N.E.2d 1238 (Ind. 2008). 

3. State V. Oddi-Smith, 878 N.E.2d 1245 (Ind. 2008). 

4. Willis V. State, 888 N.E.2d 177 (Ind. 2008). 

5. Kopczynski v. Barger, 887 N.E.2d 928 (Ind. 2008). 

6. Creech v. State, 887 N.E.2d 73 (Ind. 2008). 

7. A.B. V. State, 885 N.E.2d 1223 (Ind. 2008). 


Sullivan in civil cases. That alignment was certainly less apparent in 2008, as 
Chief Justice Shepard and Justice Sullivan agreed in only 73.1% of cases, their 
lowest level of agreement in more than five years and the second lowest pairing 
of justices for 2008. Justices Boehm and Sullivan similarly were not as aligned 
as they have been in civil cases in prior years. In 2008, they agreed in 76.5% of 
civil cases, their lowest percentage of agreement since 2002. 

These swings in the level of agreement between individual justices can exist 
even within the same year when comparing criminal and civil cases. For 
instance, Justices Dickson and Rucker were the most aligned in civil cases in 
2008, agreeing 80.4% of the time. However, these same justices voted together 
only 67.4% of the time in criminal cases in 2008, the lowest percentage on the 
year. The alignment in criminal cases between these two justices has seesawed 
over the past several years depending on the issues before the court, going from 
71.7% in 2006 to a high of 86% in 2007 and now back to a low of 67.4%. 

Fourth, the lack of ideological voting blocks is evident in the swings in the 
number of dissenting and concurring opinions the court hands down. For 
instance, only 62% of the court's opinions were unanimous in 2008, down from 
74.4% in 2007 and 67% in 2006. That percentage marks a low point since 2003, 
when the justices were unanimous only 61% of the time. Similarly, 24% of the 
court's opinions in 2008 were "split," meaning a change of a single vote one way 
or the other would have changed the result. This percentage was a marked 
increase over 2007 and 2006, where only 12 and 10% of cases were split 

One other important development occurred in 2008 in the form of an 
appreciable drop in the number of petitions for transfer filed by litigants. In 
2008, the number of petitions dropped to 858, almost 100 fewer petitions than 
were filed in 2007. It is unclear whether this is an anomaly or the start of a trend, 
but merits watching in future years. 

Table A. The number of opinions the Indiana Supreme Court issued rose to 96 
in 2008. Since the effects of the change in the court's jurisdiction began to be 
felt in 2003 and it could be more selective with its docket, it has averaged 103 
opinions per year. In 2007, the number of opinions dipped to 78. Given the 
spike back to its normal level this year, it is likely that 2007 was an anomaly 
caused by the particularly complex cases before the court at that time. The court 
also returned to form as to the number of civil opinions it handed down. In 2007, 
the court handed down more criminal opinions than civil for the first time since 
2002, when many mandatory criminal appeals remained on the docket under the 
court's old jurisdictional rules. In 2008, the court returned to form, handing 
down 52 civil opinions and 44 criminal opinions. That balance was typical for 
years prior to 2007. Justice Sullivan had the most productive year, handing down 
the most opinions at 22 (almost a quarter of the court' s opinions.) Chief Justice 
Shepard followed closely with 21 opinions and Justice Rucker had the least, at 
nine opinions. 

Table B-1. Justices Dickson and Rucker were the most aligned in civil cases and 
were the only two justices in agreement more than 80% of the time in civil cases. 

776 INDIANA LAW REVIEW [Vol. 42:773 

The next highest percentage was 1SA% of agreement, as Chief Justice Shepard 
agreed with both Justices Rucker and Boehm at that rate in 2008. Although it 
was the second highest level of agreement in 2008, this 78.4% of agreement 
would have been the second and third lowest in 2007 and 2006, respectively. 
Justices Sullivan and Dickson had the least amount of agreement at 67.3%. 

Table B-2. Chief Justice Shepard and Justice Boehm were the most aligned in 
criminal cases at 86.4%. Justice Boehm and Justice Rucker were next with 
81.8%. However, Justice Rucker did not agree with any of the other justices 
more than 73% of the time. 

Table B-3. Justices Sullivan and Dickson were the least aligned when 
considering voting for all cases. The two justices agreed in only 69.8% of all 
cases, the least amount of alignment between any two justices since 2003, when 
Chief Justice Shepard and Justice Rucker agreed in only 69.2% of all cases. 
There are no other instances where two justices agreed in less than 70% of all 
cases during that time period. The lack of alignment between Justices Sullivan 
and Dickson is consistent with prior years, as Justices Dickson and Sullivan have 
been among the least aligned of all justices going back to 2002. In fact, in 2002 
and 2007 they were the least aligned in all cases, agreeing in only 75.7 and 
83.3% of all cases in those years, respectively. 

Table C. The percentage of unanimous opinions dipped from 74.4% in 2007 to 
62% in 2008. That is the lowest since 2003, when the justices were unanimous 
only 61% of the time. Almost all of the separate opinions in these cases were 
dissents. The justices had 34 dissenting opinions but only three concurring 
opinions. This development might be part of a trend worth watching. In each of 
the past three years, the number of concurring opinions has dropped while the 
number of dissenting opinions rises. For instance, the percentage of cases with 
concurring opinions has steadily dropped from 9.5% in 2005 to 3% in 2008. 
Conversely, the percentage of dissenting opinions has gone from 26.2% in 2005 
to 34% in 2008. These numbers could indicate either that the justices are less 
likely to agree in the more complicated cases that come before them or that the 
justices are understandably more inclined to use their limited time and resources 
on fleshing out written dissenting opinions than they would be for opinions in 
which they at least concur in the result. 

Table D. The raw number of split decisions was up sharply in 2008, rising to 23. 
The court only issued 10 and 1 1 split decisions in 2007 and 2006, respectively. 
The percentage of the court's opinions that were a 3-2 split spiked as well. In 
2008, the court was split in 24% of cases, almost a full quarter of the opinions it 
handed down. The percentage was 12 and 10 for 2007 and 2006. 

Table E-1. While the court affirmed in a high percentage of civil cases, the 
percentage of reversals for all cases remained steady. The court reversed in 76% 
of all cases in 2008, as compared to 78% in 2005, 76.3% in 2006, and 74% in 
2007. As for criminal appeals, the court reversed in 81.6% of all criminal cases 


in which it had granted transfer. This percentage is another area where the court 
shows some unpredictability. In 2007, the court reversed only 74.2% of criminal 
cases while in 2006 it reversed 82.1% of them. In 2005, the court went in the 
opposite direction and reversed only 64.8% of those cases. This variance in the 
court's results in criminal transfer cases makes it difficult to predict how those 
cases will be resolved once transfer is granted and indicates that the results are 
largely driven by the nature of the cases that come before the court in a given 

Table E-2. Although the number of petitions for transfer has steadily grown for 
years, 2008 saw a surprising drop in the number of petitions filed. In 2008, the 
number of petitions to transfer dropped to 858, almost 100 fewer petitions than 
were filed in 2007. In fact, the year marked the first time since 2004 that fewer 
than 900 petitions were filed and was the second lowest total since the court's 
jurisdiction changed in 2002. The court granted 16% of the civil petitions filed, 
which was the highest percentage of civil petitions granted since 2004. It 
continues to be more difficult to obtain transfer in criminal cases, as the court 
granted only 8.5% of the criminal petitions filed. 

Table F. The Indiana Supreme Court's cases continue to cover a broad scope of 
topics, including 23 different areas of law in 2008. As the court of last resort for 
Indiana state constitutional issues, it is not surprising that state constitutional 
issues dominate the court's attention. In 2008, the court addressed the state 
constitution in 17 different cases, about 18% of its total workload. This is 
consistent with previous years, as the court has handed down at least 13 opinions 
addressing state constitutional issues in every year since 2004, when it only 
addressed those issues in 2 cases. As has been stated in this Article in previous 
years, the court has a tendency to return to areas of law after not addressing them 
over a period of years. That was certainly true again in 2008, as the court handed 
down 9 different cases that reviewed or applied Indiana's statutes of limitation 
and repose but had only addressed those topics in a single case in 2004 through 
2007. However, in 2003 it handed down four opinions on the statute of 
limitations and repose. In this vein, one area of law that might be ripe for review 
are issues associated with the public access to governmental records and 
meetings, as the court has not handed down an opinion in this area in more than 
five years. 



[Vol. 42:773 















Shepard, C.J. 









Dickson, J. 







Sullivan, J. 









Boehm, J. 










Rucker, J. 









Per Curiam 














^ These are opinions and votes on opinions by each justice and in per curiam in the 2008 term. The 
Indiana Supreme Court is unique because it is the only supreme court to assign each case to a justice by a 
consensus method. Cases are distributed by a consensus of the justices in the majority on each case either by 
volunteering or nominating writers. The chief justice does not have any power to control the assignments other 
than as a member of the majority. See Melinda Gann Hall, Opinion Assignment Procedures and Conference 
Practices in State Supreme Courts, 73 JUDICATURE 209, 209, 213 (1990). The order of discussion and voting 
is started by the most junior member of the court and follows reverse seniority. See id. at 209-10. 

^ This is only a counting of full opinions written by each justice. PluraUty opinions that announce 
the judgment of the court are counted as opinions of the court. It includes opinions on civil, criminal, and 
original actions. 

" This category includes both written concurrences, joining in written concurrence, and votes to 
concur in result only. 

** This category includes both written dissents and votes to dissent without opinion. Opinions 
concurring in part and dissenting in part or opinions concurring in part only and differing on another issue are 
counted as dissents. 





Voting Alignments for Civil Cases* 























































































































^ This Table records the number of times that one justice voted with another in full-opinion 
decisions, including per curiam, for only civil cases. For example, in the top set of numbers for Chief Justice 
Shepard, 39 is the number of times Chief Justice Shepard and Justice Dickson agreed in a full majority opinion 
in a civil case. Two justices are considered to have agreed whenever they joined the same opinion, as indicated 
by either the reporter or the explicit statement of a justice in the body of his or her own opinion. The Table does 
not treat two justices as having agreed if they did not join the same opinion, even if they agreed only in the 
result of the case or wrote separate opinions revealing little philosophical disagreement. 

"O" represents the number of decisions in which the two justices agreed in opinions of the 

court or opinions announcing the judgment of the court. 
"S" represents the number of decisions in which the two justices agreed in separate 

opinions, including agreements in both concurrences and dissents. 
"D" represents the number of decisions in which the two justices agreed in either a 

majority, dissenting, or concurring opinion. 
"N" represents the number of decisions in which both justices participated and thus the 

number of opportunities for agreement. 
"P" represents the percentage of decisions in which one justice agreed with another 
justice, calculated by dividing "D" by "N." 



[Vol. 42:773 


Voting Alignments for Criminal Cases' 






















































































































^ This Table records the number of times that one justice voted with another in full-opinion 
decisions, including per curiam, for only criminal cases. For example, in the top set of numbers for Chief 
Justice Shepard, 36 is the number of times Chief Justice Shepard and Justice Dickson agreed in a full majority 
opinion in a criminal case. Two justices are considered to have agreed whenever they joined the same opinion, 
as indicated by either the reporter or the explicit statement of a justice in the body of his or her own opinion. 
The Table does not treat two justices as having agreed if they did not join the same opinion, even if they agreed 
only in the result of the case or wrote separate opinions revealing little philosophical disagreement. 
"O" represents the number of decisions in which the two justices agreed in opinions of the 

court or opinions announcing the judgment of the court. 
"S" represents the number of decisions in which the two justices agreed in separate 

opinions, including agreements in both concurrences and dissents. 
"D" represents the number of decisions in which the two justices agreed in either a 

majority, dissenting, or concurring opinion. 
"N" represents the number of decisions in which both justices participated and thus the 

number of opportunities for agreement. 
"P" represents the percentage of decisions in which one justice agreed with another 
justice, calculated by dividing "D" by "N," 





Voting Alignments for All Cases^ 


























82.1 % 

74.7 % 






















80.0 % 

74.5 % 





















75.8 % 

75.8 % 


























73.4 % 


























75.8 % 


^ This Table records the number of times that one justice voted with another in full-opinion 
decisions, including per curiam, for all cases. For example, in the top set of numbers for Chief Justice Shepard, 
65 is the total number of times Chief Justice Shepard and Justice Dickson agreed in all full majority opinions 
written by the court in 2008. Two justices are considered to have agreed whenever they joined the same 
opinion, as indicated by either the reporter or the explicit statement of a justice in the body of his or her own 
opinion. The Table does not treat two justices as having agreed if they did not join the same opinion, even if 
they agreed only in the result of the case or wrote separate opinions revealing little philosophical disagreement. 
"O" represents the number of decisions in which the two justices agreed in opinions of the 

court or opinions announcing the judgment of the court. 
"S" represents the number of decisions in which the two justices agreed in separate 

opinions, including agreements in both concurrences and dissents. 
"D" represents the number of decisions in which the two justices agreed in either a 

majority, dissenting, or concurring opinion. 
"N" represents the number of decisions in which both justices participated and thus the 

number of opportunities for agreement. 
"P" represents the percentage of decisions in which one justice agreed with another 
justice, calculated by dividing "D" by "N." 

782 INDIANA LAW REVIEW [Vol. 42:773 


Not Including Judicial or Attorney Discipline Cases'* 

Unanimous Opinions 

Unanimous' with Concurrence' with Dissent Total 

Criminal Civil Total Criminal Civil Total Criminal Civil Total 

26 34 60(62.0%) 3 3(3.0%) 16 18 34(35.0%) 97 

^ This Table tracks the number and percent of unanimous opinions among all opinions written. If, 
for example, only four justices participate and all concur, it is still considered unanimous. It also tracks the 
percentage of overall opinions with concurrence and overall opinions with dissent. 

' A decision is considered unanimous only when all justices participating in the case voted to concur 
in the court's opinion as well as its judgment. When one or more justices concurred in the result, but not in the 
opinion, the case is not considered unanimous. 

^ A decision is hsted in this column if one or more justices concurred in the result, but not in the 
opinion of the court or wrote a concurrence, and there were no dissents. 





3-2 Decisions'" 

Justices Constituting the Majority 

Number of Opinions' 

1. Shepard, C.J., Dickson, J., Sullivan, J. 

2. Shepard, C.J., Dickson, J., Boehm, J. 

3. Shepard, C.J., Dickson, J., Rucker, J. 

4. Shepard, C.J., Sullivan, J., Boehm, J. 

5. Shepard, C.J., Sullivan, J., Rucker, J. 

6. Shepard, C.J., Boehm, J., Rucker, J. 

7. Dickson, J., Sullivan, J., Rucker, J. 

8. Dickson, J., Boehm, J., Rucker, J. 

9. Sullivan, J., Boehm, J., Rucker, J. 

10. Boehm, J., Sullivan, J. 



^ This Table concerns only decisions rendered by full opinion. An opinion is counted as a 3-2 
decision if two justices voted to decide the case in a manner different from that of the majority of the court. 

' This column lists the number of times each three-justice group constituted the majority in a 3-2 

■" The 2008 term's 3-2 decisions were: 

1. Shepard, C.J., Dickson, J., SuUivan, J.: Norris v. State, 896 N.E.2d 1 149 (Ind. 2008) (Dickson, J.). 

2. Shepard, C.J., Dickson, J., Boehm, J.: In re Benkie, 892 N.E.2d 1237 (Ind. 2008) (per curiam); 
Bowles V. State, 891 N.E.2d 30 (Ind. 2008) (Boehm, J.); State v. Jackson, 889 N.E.2d 819 (Ind. 2008) 
(Dickson, J.); Belvedere v. State, 889 N.E.2d 296 (Ind. 2008) (Boehm, J.); Membres v. State, 889 N.E.2d 265 
(Ind. 2008) (Boehm, J.), reh'g denied; Villas W. n of Willowridge Homeowners Ass'n v. McGlothin, 885 
N.E.2d 1274 (Ind. 2008) (Shepard, C.J.), cert, denied, 129 S. Ct. 1527 (2009). 

3. Shepard, C.J., Dickson, J., Rucker, J.: Queerey & Harrow, Ltd. v. Transcon. Ins. Co., 885 N.E.2d 
1235 (Dickson, J.). 

4. Shepard, C.J., SuUivan, J., Boehm, J.: Overton v. Grillo, 896 N.E.2d 499 (Ind. 2008) (Boehm, J.), 
reh 'g denied; Walden v. State, 895 N.E.2d 1 182 (Ind. 2008) (Sullivan, J.); Smith v. State, 889 N.E.2d 261 (Ind. 
2008) (Sullivan, J.); Ind. State Univ. v. LaFief, 888 N.E.2d 184 (Ind. 2008) (Shepard, C.J.); State Farm Mut. 
Auto. Ins. Co. V. D.L.B., 881 N.E.2d 665 (Ind. 2008) (Sullivan, J.); Keesling v. Beegle, 880 N.E.2d 1202 (Ind. 
2008) (SuUivan, J.). 

5. Shepard, C.J., SuUivan, J., Rucker, J.: Sweatt v. State, 887 N.E.2d 81 (Ind. 2008) (Shepard, CJ.); 
Auto-Owners Ins. Co. v. Bank One, 879 N.E.2d 1086 (Ind. 2008) (SuUivan, J.). 

6. Shepard, C.J., Boehm, J., Rucker, J.: In re Fieger, 887 N.E.2d 87 (Ind. 2008) (per curium). 

7. Dickson, J., SuUivan, J., Rucker, J.: 600 Land, Inc. v. Metro. Bd. of Zoning Appeals of Marion 
County, 889 N.E.2d 305 (Ind. 2008) (SuUivan, J.); Watts v. State, 885 N.E.2d 1228 (Ind. 2008) (SuUivan, J.). 

8. Dickson, J., Bohm, J., Rucker, J.: Newton v. State, 894 N.E.2d 192 (Ind. 2008) (Dickson, J.). 

9. Sullivan, J., Boehm, J., Rucker, J.: In re Coleman, 885 N.E.2d 1238 (Ind. 2008) (per curiam); Cent. 
Ind. Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008) (Boehm, J.). 

10. Boehm, J., SuUivan, J.: Herron v. Anigbo, 897 N.E.2d 444 (Ind. 2008) (Boehm J.). 



[Vol. 42:773 


Disposition of Cases Reviewed by Transfer 
AND Direct Appeals'* 

Reversed or Vacated" 



Civil Appeals Accepted for Transfer 
Direct Civil Appeals 
Criminal Appeals Accepted for Transfer 
Direct Criminal Appeals 

35 (80.0%) 

9 (20.0%) 


1 (100.0%) 



31 (81.6%) 

7 (18.4%) 



5 (100%) 



67 (76.1%) 

21 (23.9%) 


" Direct criminal appeals are cases in which the trial court imposed a death sentence. See IND. 
Const, art. Vn, § 4. Thus, direct criminal appeals are those directly from the trial court. A civil appeal may 
also be direct from the trial court. See iND. APP. R. 56, 63 (pursuant to Rules of Procedure for Original 
Actions). All other Indiana Supreme Court opinions are accepted for transfer from the Indiana Court of 
Appeals. See iND. APP. R. 57. 

° Generally, the term "vacate" is used by the Indiana Supreme Court when it is reviewing a court of 
appeals opinion, and the term "reverse" is used when the court overrules a trial court decision. A point to 
consider in reviewing this Table is that the court technically "vacates" every court of appeals opinion that is 
accepted for transfer, but may only disagree with a small portion of the reasoning and still agree with the result. 
See iND. App. R. 58(A). As a practical matter, "reverse" or "vacate" simply represents any action by the court 
that does not affirm the trial court or court of appeals 's opinion. 

P This does not include one attorney discipline opinion. This opinion did not reverse, vacate, or 
affirm any other court's decision. 



Disposition of Petitions to Transfer 
TO Supreme Court in 2008** 

Denied or Dismissed Granted Total 

Petitions to Transfer 




Total 764(89.0%) 94(11.0%) 858 

247 (84.0%) 

47 (16.0%) 



44 (8.5%) 


42 (93.3%) 

3 (6.7%) 


This Table analyzes the disposition of petitions to transfer by the court. See IND. APP. R. 58(A). 
This also includes petitions to transfer in tax cases and workers' compensation cases. 
This also includes petitions to transfer in post-conviction relief cases. 

786 INDIANA LAW REVIEW [Vol. 42:773 


Subject Areas of Selected Dispositions 
WITH Full Opinions* 

Original Actions Number 

• Certified Questions 

• Writs of Mandamus or Prohibition 

• Attorney Discipline 8" 

• Judicial Discipline 


• Death Penalty T 

• Fourth Amendment or Search and Seizure 4^* 

• Writ of Habeas Corpus 

Emergency Appeals to the Supreme Court 4" 

Trusts, Estates, or Probate T 

Real Estate or Real Property 9* 

Personal Property 

Landlord-Tenant T^ 

Divorce or Child Support 


Children in Need of Services (CHINS) 



Product Liability or Strict Liability 1'*'' 

Negligence or Personal Injury 4** 

Invasion of Privacy 

Medical Malpractice 5*^ 

Indiana Tort Claims Act 

Statute of Limitations or Statute of Repose 9^ 

Tax, Department of State Revenue, or State Board of Tax Commissioners 1** 

Contracts 5^ 

Corporate Law or the Indiana Business Corporation Law 
Uniform Commercial Code 1^ 

Banking Law l** 

Employment Law 3" 

Insurance Law 


Environmental Law 


Consumer Law 

Workers' Compensation 



Administrative Law 


First Amendment, Open Door Law, or Pubhc Records Law 

Full Faith and Credit 

Eleventh Amendment 

Civil Rights 

Indiana Constitution 


' This Table is designed to provide a general idea of the specific subject areas upon which the court 
ruled or discussed and how many times it did so in 2008. It is also a quick-reference guide to court ruUngs for 
practitioners in specific areas of the law. The numbers corresponding to the areas of law reflect the number of 
cases in which the court substantively discussed legal issues about these subject areas. Also, any attorney 
discipline case resolved by order (as opposed to an opinion) was not considered in preparing this Table. 


In re Anonymous, 896 N.E.2d 916 (Ind. 2008); In re Powell, 893 N.E.2d 729 (Ind. 2008); In re 
Benkie, 892 N.E.2d 1237 (Ind. 2008); In re Patterson, 888 N.E.2d 752 (Ind. 2008); In re Fieger, 887 N.E.2d 
87 (Ind. 2008); In re Colman, 885 N.E.2d 1238 (Ind. 2008); In re Cueller, 880 N.E.2d 1209 (Ind. 2008); In re 
Bash, 880 N.E.2d 1 182 (Ind. 2008). 

Jeter v. State, 888 N.E.2d 1257 (Ind. 2008); Sholes v. State, 878 N.E.2d 1232 (Ind. 2008). 
Bowles V. State, 891 N.E.2d 30 (Ind. 2008); Belvedere v. State, 889 N.E.2d 286 (Ind. 2008); 
Membres v. State, 889 N.E.2d 265 (Ind. 2008); Campos v. State, 885 N.E.2d 590 (Ind. 2008). 

Marion County Election Bd. v. Schoettle, 899 N.E.2d 642 (Ind. 2008); Wagler v. W. Boggs Sewer 
Dist., Inc., 898 N.E.2d 815 (Ind. 2008); State v. Am. Family Voices, Inc., 898 N.E.2d 293 (Ind. 2008); State 
V. Oddi-Smith, 878 N.E.2d 1245 (Ind. 2008). 

y Carlson v. Sweeney, Dabagia, Donoghue, Thome, Janes & Pagos, 895 N.E.2d 1191 (Ind. 2008); 
McPeek v. McCordle, 888 N.E.2d 171 (Ind. 2008). 

Wagler v. W. Boggs Sewer Dist., Inc., 898 N.E.2d 815 (Ind. 2008); 600, Land hic. v. Metro. Bd. 
of Zoning Appeals, 889 N.E.2d 305 (Ind. 2008); Brenwick Assoc, LLC v. Boone County Redev. Comm'n, 889 
N.E.2d 289 (Ind. 2008); Pflanz v. Foster, 888 N.E.2d 756 (Ind. 2008); McPeek v. McCordle, 888 N.E.2d 171 
(Ind. 2008); Kopczynski v. Barger, 887 N.E.2d 928 (Ind. 2008); Nu-Sash of IndianapoHs, Inc. v. Carter, 887 
N.E.2d 92 (Ind. 2008); Villas W. H of Willowridge Homeowners Ass'n v. McGlothin, 885 N.E.2d 1274 (hid. 
2008); State v. Universal Outdoor, hic, 880 N.E.2d 1 188 (hid. 2008). 

Morton v. Ivacic, 898 N.E.2d 1196 (hid. 2008); Pinnacle Props. Dev. Group, Inc. v. City of 
Jeffersonville, 893 N.E.2d 726 (hid. 2008). 

"" Bailey v. Mann, 895 N.E.2d 1215 (hid. 2008); Young v. Young, 891 N.E.2d 1045 (hid. 2008); In 
re Marriage of Huss, 888 N.E.2d 1238 (hid. 2008); Stewart v. VuUiet, 888 N.E.2d 761 (hid. 2008); Baxendale 
V. Raich, 878 N.E.2d 1252 (hid. 2008). 

'' In re Marriage of Huss, 888 N.E.2d 1238 (hid. 2008). 

"" Technisand, hic. v. Melton, 898 N.E.2d 303 (hid. 2008). 

Travelers Cas. & Sur. Co. v. U.S. Filter Corp., 895 N.E.2d 1 1 72 (hid. 2008); Kopczynski v. Barger, 
887 N.E.2d 928 (hid. 2008); Nichols v. Minnick, 885 N.E.2d 1 (hid. 2008); Filip v. Block, 879 N.E.2d 1076 
(hid. 2008). 

^ Newkirk v. Bethlehem Woods Nursing & Rehab. Ctr., LLC, 898 N.E.2d 299 (hid. 2008); Herron 
V. Anigbo, 897 N.E.2d 444 (hid. 2008); Overton v. Grillo, 896 N.E.2d 499 (hid. 2008); Chi Yun Ho v. Frye, 
880 N.E.2d 1 192 (hid. 2008); Brinkman v Bueter, 879 N.E.2d 549 (hid. 2008). 

ss Technisand, hic. v. Melton, 898 N.E.2d 303 (hid. 2008); Newkirk v. Bethlehem Woods Nursing & 
Rehab. Ctr., LLC, 898 N.E.2d 299 (hid. 2008); Herron v. Anigbo, 897 N.E.2d 444 (hid. 2008); Overton v. 
Grillo, 896 N.E.2d 499 (hid. 2008); Pflanz v. Foster, 888 N.E.2d 756 (hid. 2008); Jewell v. State, 887 N.E.2d 
939 (hid. 2008); Auto-Owners his. v. Bank One, 879 N.E.2d 1086 (hid. 2008); Filip v. Block, 879 N.E.2d 1076 
(hid. 2008); Brinkman v. Bueter, 879 N.E.2d 549 (hid. 2008). 

"■^ Young V. Young, 891 N.E.2d 1045 (hid. 2008). 

" hid. Dep't of Envd. Mgmt. v. Raybestos Prods. Co., 897 N.E.2d 469 (Ind. 2008); Roberts v. 
Community Hosps. of hid., hic, 897 N.E.2d 458 (hid. 2008); Reuille v. E.E. Brandenberger Constr., hic, 888 
N.E.2d 770 (hid. 2008); Nu-Sash of hidianapohs, hic v. Carter, 887 N.E.2d 92 (hid. 2008); Cent. hid. Podiatry 
P.C. V. Krueger, 882 N.E.2d 723 (hid. 2008). 

^ Auto-Owners his. Co. v. Bank One, 879 N.E.2d 1086 (hid. 2008). 

^ Auto-Owners his. Co. v. Bank One, 879 N.E.2d 1086 (hid. 2008). 

" Bamett v. Clark, 889 N.E.2d 281 (hid. 2008); hid. State Univ. v. LaFief, 888 N.E.2d 184 (hid. 
2008); Cent. hid. Podiatry P.C. v. Krueger, 882 N.E.2d 723 (hid. 2008). 

■""^ Travelers Cas. & Sur. Co. v. U.S. Filter Corp., 895 N.E.2d 1 172 (hid. 2008); Querrey & Harrow, 
Ltd. V. Transcon. his. Co., 885 N.E.2d 1235 (hid. 2008); Elliot v. Allstate his. Co., 88 1 N.E.2d 662 (hid. 2008); 
State Farm Mut. Auto. Ins. Co. v. D.L.B. ex rel. Brake, 88 1 N.E.2d 665 (hid. 2008); State Farm Mut. Auto. his. 
Co. V. Jakpuko, 881 N.E.2d 654 (hid. 2008); Filip v. Block, 879 N.E.2d 1076 (hid. 2008). 

788 INDIANA LAW REVIEW [Vol. 42:773 

Ind. Dep't of Envtl. Mgmt. v. Raybestos Prods. Co., 897 N.E.2d 469 (Ind. 2008); Pflanz v. Foster, 
888 N.E.2d 756 (Ind. 2008). 

Christopher R. Brown, D.D.S., Inc. v. Decatur County Mem'l Hosp., 892 N.E.2d 642 (Ind. 2008); 
Mayes v. Second Injury Fund, 888 N.E.2d 773 (Ind. 2008). 

pp Ind. Dep't of Envtl. Mgmt. v. Raybestos Prods. Co., 897 N.E.2d 469 (Ind. 2008); Brenwick Assocs., 
LLC V. Boone County Redev. Comm'n, 889 N.E.2d 289 (Ind. 2008); Ind. State Univ. v. LaFief, 888 N.E.2d 
184 (Ind. 2008). 

"'" State V. Washington, 898 N.E.2d 1200 (Ind. 2008); Harris v. State, 897 N.E.2d 927 (Ind. 2008); 
Herron v. Anigbo, 897 N.E.2d 444 (Ind. 2008); Cardwell v. State, 895 N.E.2d 1219 (Ind. 2008); Bassett v. 
State, 895 N.E.2d 1201 (Ind. 2008); Lee v. State, 892 N.E.2d 1231 (Ind. 2008); Christopher R.Brown, D.D.S., 
Inc. V. Decatur County Mem'l Hosp., 892 N.E.2d 642 (Ind. 2008); Bowles v. State, 891 N.E.2d 30 (Ind. 2008); 
Membres v. State, 889 N.E.2d 265 (Ind. 2008); Campos v. State, 885 N.E.2d 590 (Ind. 2008); Higgason v. 
State Dep't of Corr., 883 N.E.2d 816 (Ind. 2008); Higgason v. Ind. Dep't of Corr., 883 N.E.2d 814 (Ind. 2008); 
Higgason v. Ind. Dep't of Corr., 883 N.E.2d 812 (Ind. 2008); Smith v. Ind. Dep't of Corr., 883 N.E.2d 802 (Ind. 
2008); City of Carmel v. Martin Marietta Materials, Inc., 883 N.E.2d 781 (Ind. 2008); Gauvin v. State, 883 
N.E.2d 99 (Ind. 2008); Brinkman v. Bueter, 879 N.E.2d 549 (Ind. 2008). 

Survey of Indiana Administrative Law 

Jennifer Wheeler Terry* 

Administrative law is the body of law concerning the operation of 
administrative agencies. This Article reviews the application of administrative 
law to agencies operating at the Indiana state and local level. For the most part, 
the principles of administrative law are well settled in Indiana, and this article 
summarizes Indiana Administrative Law, and particularly case law, as courts 
apply those well settled principles to the particular disputes arising during the 
survey period from October 1, 2007 through September 30, 2008. 

I. Judicial Review 

Indiana's Administrative Orders and Procedures Act (AOPA) provides that 
a court may provide relief only if the agency action is: 

(1) arbitrary, capricious, an abuse of discretion, or otherwise not in 
accordance with law; (2) contrary to constitutional right, power, 
privilege, or immunity; (3) in excess of statutory jurisdiction, authority, 
or limitations, or short of statutory right; (4) without observance of 
procedure required by law; or (5) unsupported by substantial evidence.^ 

Judicial review from agencies not explicitly governed by AOPA frequently 
applies the same or similar standard of review to decisions of those agencies. 

A. Standard of Review — in General 

Although the standard of review is deferential in most respects, particularly 
on issues of fact and statutory interpretation, it is not surprising that the standard 
of review itself sometimes becomes an issue on appeal as parties try to convince 
the court to apply a standard which best serves their purposes. This occurred in 
Town of Chandler v. Indiana-American Water Co? when Chandler argued that 
the standard of review was de novo because the issue was one of statutory 
interpretation.^ Indiana-American countered this position and claimed that the 
reviewing court should defer to the construction of a statute by the administrative 
agency charged with enforcing it."^ 

Not only did the parties disagree over the appropriate standard of review, but 
the appellee, Indiana- American, moved to strike portions of Chandler's reply 
brief because Chandler raised the appropriate standard of review for the first time 
at the reply stage.^ On this aspect of the debate, the court of appeals held that the 

* Jennifer Wheeler Terry, Director, Lewis & Kappes, 2500 One American Square, 
Indianapolis. I thank Joseph Rompala, Associate, Lewis & Kappes, for his contributions to this 

1. IND. Code § 4-2 1.5-5- 14(d) (2005). 

2. 892 N.E.2d 1264 (Ind. Ct. App. 2008). 

3. /J. at 1267. 

4. Id. 

5. Id. 

790 INDIANA LAW REVIEW [Vol. 42:789 

issue of which standard of review to apply is always before the reviewing court, 
and that parties need not present the standard of review as an issue before the 
court can address it.^ 

After resolving this preliminary issue, the court applied a de novo standard 
of review because the statute in question was not one that the Indiana Utility 
Regulatory Commission was charged with enforcing, but rather one which set 
forth the jurisdiction of the Commission to hear certain disputes.^ 

B. Scope of Review 

The Indiana Supreme Court addressed whether it was proper for the 
reviewing court to reach the merits of a case arising out of an administrative 
decision in 600 Land, Inc. v. Metropolitan Board of Zoning Appeals of Marion 
County} In a 3-2 decision, the court chose to address a critical issue on the 
merits, despite certain parties' failure to present the question to the Board of 
Zoning Appeal (BZA).^ 

As the court explained, the landowner sought a special exception from the 
BZA for land that the landowner intended to develop as a solid waste transfer 
station and recycling facility. ^^ The BZA denied the petition. ^^ The landowner 
sought judicial review and amended its appeal to argue that it was not required 
to obtain a special exception at all because its use fell within the approved use 
for the zoning district. ^^ 

The trial court held that the landowner was required to obtain a special use 
exception and affirmed the denial of the special exception. ^^ The court of 
appeals agreed that a special use exception was required, but reversed the BZA's 
denial on grounds that its findings were unsupported by the evidence.*"^ The BZA 
and an adjoining landowner sought transfer. ^^ 

Although the landowner had not challenged whether it needed a special 
exception to the BZA, the supreme court indicated it was appropriate to review 
the case on the merits for three reasons. ^^ First, the landowner had been advised 
to seek the special exception and doing so was the most practical approach that 
placed the least burden on the legal system. ^^ Second, the court found that the 
BZA or other intervenors were not prejudiced by the way the case evolved — the 


Id. at 1268. 




889 N.E.2d 305 (Ind. 2008) 


Id. at 307-08. 


Id. at 306-07. 


Id. at 307. 










Id. at 307-08. 


Id. at 308. 


BZA's decision would have been reviewed de novo as an issue of law. ^^ Finally, 
neither the BZA nor intervenors objected to the issue being raised at the trial 
court. ^^ 

After resolving this issue, the majority reversed the trial court and found that 
the proposed waste transfer station was a permitted use under the zoning 
ordinance without a special exception.^^ Justice Boehm, writing for the dissent, 
questioned the majority's reasoning, suggesting that the majority had failed to 
give appropriate deference to the interpretation advanced by the agency charged 
with the ordinance's enforcement.^^ 

C Application of Standard of Review 

1. Arbitrary and Capricious or an Abuse of Discretion. — Two cases during 
the survey period contained substantial discussions of the arbitrary and 
capricious standard. In Board of Commissioners of LaPorte County v. Great 
Lakes Transfer, LLC,^^ the court of appeals upheld a decision by the Office of 
Environmental Adjudication (OEA) regarding the issuance of a solid waste 
transfer facility permit.^^ County boards and towns challenged several portions 
of the OEA's decision as arbitrary or capricious.^"^ However, all of their 
arguments were rejected. 

After setting forth the AOPA standard of review, the court of appeals noted 
that a reviewing court may not "'substitute its judgment for that of the 
agency. '"^^ The court further stated that "an action is arbitrary and capricious 
where there is no reasonable basis for the action."^^ 

One issue was whether OEA should have granted a permit even though the 
applicant. Great Lakes Transfer, did not have a permit for road access. ^^ The 
regulation required the applicant to provide a plot plan showing how the facility 
would have road access.^^ The court found that OEA's decision was not arbitrary 
or capricious.^^ In addition, the court held that OEA's decision was not arbitrary 
or capricious even though Great Lakes Transfer's building permit was later 
rescinded because when the permit was issued. Great Lakes Transfer had a valid 






Id. at 312. 


Id. (Boehm, J., dissenting). 


888 N.E.2d 784, 787 (Ind. Ct. App. 2008). 






Id. at 788 (quoting Ind. Dep't of Envtl. Mgmt. v. 

. Boone 

County Res. 

Recovery Sys., Inc., 

803 N.E.2d 267, 271 (Ind. Ct. App. 2004)). 


Id. at 789 (citing Boone County, 803 N.E.2d at 272.). 


Id. at 191. 


Id. at 794. 


Mat 795. 

792 INDIANA LAW REVIEW [Vol. 42:789 

building permit.^^ The court of appeals also emphasized that the applicant would 
not be exempt from complying with other state and local requirements, such as 
having a driveway permit^' or building permit,^^ just because it had the IDEM 

Appellants also argued that IDEM failed to consider concerns regarding 
wetlands surrounding the site, however, both the trial court and court of appeals 
found that there was no requirement for IDEM to consider generalized 
possibilities of harm.^^ 

With regard to the appellants' final argument that IDEM ignored certain 
other environmental concerns expressed by the public, the court found that those 
arguments were based on a separate statute discussing IDEM's duty to 
investigate concerns. ^"^ IDEM properly conducted public hearings and received 
public comments, and there was no evidence of negative environmental impact; 
so, the decision was not arbitrary or capricious. ^^ 

In Madison State Hospital v. Ferguson^^ a nurse supervisor at a state hospital 
challenged the State's pay plan for nurses which resulted in night nurses 
receiving higher pay than nurse supervisors.^^ The court of appeals determined 
that the State Employees' Appeals Commission (SEAC) did not act arbitrarily or 
capriciously.^^ The SEAC had analyzed national and local market surveys, which 
showed a high turnover rate of night nurses and the difficulties experienced in 
recruiting people to fill that position.^^ This data analysis showed that the agency 
action was not arbitrary and capricious. "^^ 

2. Contrary to Law. — The Indiana Natural Resources Commission' s (NRC) 
determination regarding parties riparian rights — specifically the manner of 
determining boundaries that extend from shore — was challenged as being 
contrary to law in Lukis v. Ray^^ The trial court found that the NRC's 
determination was contrary to law, but the court of appeals reversed."^^ Case law 
indicated several different methods of establishing the extension of boundaries 
into a lake."^^ The NRC used one method, but the trial court adopted a different 

30. /^. at 798-801. 

31. Mat 795. 

32. /c?. at 801. 

33. /6?. at 801-02. 

34. M. at 803-04 

35. Id. at S04. 

36. 874 N.E.2d 615 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 39 (Ind. 2008). 

37. /^. at 617-18. 

38. Id. at 620. Madison State also presented a challenge alleging the SEAC's decision was 
contrary to law. Id. at 621. This too was rejected. Id. 

39. Id. 

40. Id. 

41. 888 N.E.2d 325, 326 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1225 (Ind. 2008). 

42. Id. at 333. 

43. Mat 331-32. 


analysis."^"^ The court of appeals found that the trial court had impermissibly 
second guessed the agency."^^ 

The court of appeals held that an agency had erred as a matter of law in In 
re South Haven Sewer Works, Inc.^^ A consent decree between the federal 
Environmental Protection Agency (EPA) and South Haven required South Haven 
to obtain the EPA' s prior approval before filing a petition with the Indiana Utility 
Regulatory Commission (lURC) to expand its service territory/^ The lURC 
issued a certificate of territorial authority (CTA) despite the fact that South 
Haven had not complied with the decree.'*^ In issuing the CTA, the lURC relied 
upon extrinsic evidence including testimony and other documents to determine 
the intent of the parties. "^^ The court of appeals determined that the lURC had 
erred because the language of the consent decree was unambiguous and its terms 
were conclusive.^^ 

Conflicts between two agencies arose in Pierce v. State Department of 
Correction,^^ which concerned the Department of Correction's (DOC) 
interpretation of its authority to order teachers within correctional facilities to 
have special education licenses. ^^ Under an agreement between the State of 
Indiana and the U.S. Department of Justice, the State agreed that all teachers in 
specific correctional facilities would obtain special education certificates.^^ The 
DOC then sought to apply the same rule to all facilities in the state.^"^ A group 
of teachers filed complaints which reached the SEAC. The SEAC agreed that the 
DOC could require the teachers to obtain a special education license, but it also 
recommended that the DOC assist the teachers in paying for obtaining the new 
licenses and to establish a waiver system.^^ 

The underlying issue required the court to decide how to reconcile title 1 1 
of the Indiana Code, which concerns corrections, and title 20 of the code, which 
governs education. ^^ After undertaking its own review of the statutes in question, 
the court found that the DOC's interpretation of the statutes was not 
unreasonable and therefore not arbitrary, capricious, or in violation of 
constitutional, statutory, or legal principles. ^^ 

With regard to whether the trial court improperly ordered the DOC to comply 

44. Id. at 332. 

45. Id. 

46. 880 N.E.2d 706 (Ind. Ct. App. 2008). 

47. Mat 709-10. 

48. Id. 

49. Mat 7 12. 

50. Id. 

51. 885 N.E.2d 77 (Ind. Ct. App. 2008). 

52. Id. at 78. 

53. Id. at 79. 

54. Id. at 80. 

55. Id. at 82-87. 

56. Id. at 88. 

57. Mat 91. 

794 INDIANA LAW REVIEW [Vol. 42:789 

with SEAC's recommendations, the court of appeals held that the SEAC's 
recommendations were not mandatory .^^ The recommendations were made under 
the part of the statute that speaks broadly to SEAC's authority to recommend 
policy and the trial court had improperly ordered the DOC to comply.^^ 

3. Substantial Evidence. — Challenges based on substantial evidence are not 
frequently successful, as the cases arising during the survey period show. A 
decision by the BZA not to grant a special exception was reviewed for substantial 
evidence in Midwest Minerals, Inc. v. Board of Zoning Appeals. ^^ The court of 
appeals stated that "evidence will be considered substantial if it is more than a 
scintilla and less than preponderance. In other words, substantial evidence is 
such relevant evidence as a reasonable mind might accept as adequate to support 
a conclusion."^^ The Zoning Ordinance at issue indicated that an applicant may 
be awarded a special exception if it met three requirements.^^ The BZA found 
that the landowner failed to meet one of the requirements, specifically the 
applicant had failed to prove that its proposed use of the property would not be 
injurious to the public health, safety, comfort, morals, convenience, or general 
welfare of the community.^^ 

The court of appeals found that the BZA's decision was supported by 
substantial evidence.^"^ The crux of the applicant's appeal was that once it 
complied with the relevant statutory criteria, granting a special exception was 
mandatory.^^ The court disagreed, finding that the BZA had discretion to deny 
the permit if it found the application would not serve the public welfare, even if 
the applicant met the other criteria.^^ 

An issue of substantial evidence was also presented in Dietrich Industries, 
Inc. V. Teamsters Local Unit 142.^^ In Dietrich a company appealed the 
Unemployment Insurance Review Board' s determination that its employees were 
eligible for benefits during a lockout and subsequent "start-up."^^ A key issue 
relative to the entitlement of benefits was whether the parties had reached an 
impasse in negotiations. The Administrative Law Judge (ALJ) found that an 
impasse existed from May to September, but not at the time of the lockout.^^ The 
court stated that the existence of an impasse is a factual determination, which the 

58. /J. at 93. 

59. Id. 

60. 880 N.E.2d 1264 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1223 (Ind. 2008). 

61 . Id. at 1269 (citing Crooked Creek Conservation & Gun Club v. Hamilton County N. Bd. 
of Zoning Appeals, 677 N.E.2d 544, 547-48 (Ind. Ct. App. 1997)). 

62. Id. 

63. Id. at 1270 (citing Crooked Creek, 677 N.E.2d at 547). 

64. Mat 1269-70. 

65. Mat 1270. 

66. Id. 

67. 880 N.E.2d 700 (Ind. Ct. App. 2008). 

68. Mat 702. 

69. Id. at 703-04. 


court was bound to uphold as long as it was supported by substantial evidence 7° 
The court defined an impasse as the "absence of an atmosphere in which a 
reasonably foreseeable settlement of the disputed issues might be resolved,"^^ 
and the court could not say that the ALJ had erred by finding the offer to return 
to work created such an atmosphere^^ 

In Employee Benefit Managers, Inc. of America v. Indiana Department of 
Insurance^^ the court stated that the substantial evidence standard is met "[i]f a 
reasonable person would conclude that the evidence and the logical and 
reasonable inferences therefrom are of such a substantial character and probative 
value so as to support the administrative determination. "^"^ The company 
challenging the agency's decision did not meet its burden of showing a lack of 
substantial evidence because the company's president had conceded certain 
deficiencies.^^ The company argued that the findings emphasized minor portions 
of testimony and that it had substantially complied with requirements.^^ The 
court of appeals rejected these arguments.^^ 

The court of appeals also discussed the proper application of the McDonnell 
Douglas burden-shifting analysis applicable to employment discrimination cases 
in Whirlpool Corp. v. Vanderburgh County-City ofEvansville Human Relations 
Commissions^ Reviewing courts can (1) only point out legal errors in the 
application of the McDonnell Douglas burden-shifting method, and (2) examine 
the record for substantial evidence of each prong of the analysis.^^ 

D. Statutory Interpretation 

Two cases during the survey period reached different results on issues of 
statutory interpretation. Indiana Department of Environmental Management v. 
Construction Management Associates, L.L.C.,^^ contains a very good summary 
of how courts approach issues of statutory interpretation.^^ IDEM is charged 
with enforcing the Federal Safe Drinking Water Act (SDWA) within Indiana.^^ 
As part of enforcing that regulation, the Indiana Water Pollution Control Board 

70. /J. at 704. 

71. Id. at 703 (quoting Auburn v. Review Bd. of Ind. Employment Sec. Div., 437 N.E.2d 
1011, 1014 (Ind. Ct. App. 1982)). 

72. Mat 703-04. 

73. 882 N.E.2d 230 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1217 (Ind. 2008). 

74. Id. at 237. 

75. Id. 

76. Id. 
11. Id. 

78. 875 N.E.2d 751, 758 (Ind. Ct. App. 2007). 

79. Id. at 759-60. 

80. 890 N.E.2d 107 (Ind. Ct. App. 2008). 

81. Mat 112-14. 

82. Id. at 109. 

796 INDIANA LAW REVIEW [Vol. 42:789 

promulgated regulations defining a "public water system."^^ IDEM claimed that 
a construction company was operating a "public water system" for an apartment 
complex that had been constructed in two phases.^"^ On appeal, IDEM claimed 
the trial court failed to defer to IDEM's reasonable interpretation of a rule it is 
charged with enforcing. ^^ 

The court of appeals set forth the framework courts should use when 
reviewing an issue of statutory interpretation by first noting that issues of 
statutory interpretation are questions of law reviewed de novo.^^ "When a statute 
has not previously been construed, [a court's] interpretation is controlled by the 
express language of the statute and the rules of statutory construction."^^ If a 
term in the statute is undefined, the reviewing court must "'examine the statute 
as a whole and attribute the common and ordinary meaning to the undefined 
word, unless doing so would deprive the statute of its purpose or effect. '"^^ 

Nevertheless, the court of appeals suggested that even under a de novo 
standard, the agency's interpretation of a statute it is charged with enforcing is 
entitled to deference. The agency's interpretation "is entitled to great weight, 
unless that interpretation is inconsistent with the statute itself."^^ As the court 
further explained, "[o]nce a court determines that an administrative agency's 
interpretation is reasonable, it should 'terminate [] its analysis' and not address 
the reasonableness of the other party's interpretation. "^° This rule acknowledges 
the expertise of agencies, empowers such agencies to interpret and enforce 
statutes, and increases public reliance on agency interpretations.^^ 

The court of appeals found that IDEM's interpretation was reasonable even 
though it hinged on a meaning of a term which was undefined in the statute. ^^ 
The court found that IDEM's definition was supported by Black's Law 
Dictionary and Webster's Third New International Dictionary as well as 
Congress's intent in passing the SDWA.^^ 

A similar question arose in South Bend Community School Corp. v. Lucas, ^"^ 
where a teacher with the federally funded Head Start program applied for 
employment compensation during the program's summer break.^^ Indiana has 

83. Id. at 110. 

84. Id. 

85. Mat 111. 

86. Id. a.t\l2. 

87. Id. (citing Ross v. Ind. State Bd. of Nursing, 790 N.E.2d 1 10, 1 19 (Ind. Ct. App. 2003)). 

88. Id. (quoting Consolidation Coal Co. v. Ind. Dep't of State Revenue, 583 N.E.2d 1 199, 
1201 (Ind. 1991)). 

89. Id. at 113 (citing LTV Steel Co. v. Griffin, 730 N.E.2d 1251, 1257 (Ind. 2000)). 

90. Id. (quoting Ind. Wholesale Wine & Liquor Co. v. State ex rel Ind. Alcoholic Beverage 
Comm'n, 695 N.E.2d 99, 105 (Ind. 1998)). 

91. Id. (citing Ind. Wholesale Wine, 695 N.E.2d at 105). 

92. Id. 

93. /J. at 113-14. 

94. 881 N.E.2d 30 (Ind. Ct. App.), trans, denied, 891 N.E.2d 52 (Ind. 2008). 

95. /J. at 31. 


"statutorily excluded employees of educational institutions from receiving 
unemployment benefits for periods of unemployment between academic terms, "^^ 
however, the statute does not define "educational institution."^^ The 
Unemployment Insurance Review Board found that the Head Start program was 
not an educational institution within the meaning of the relevant statute and 
therefore that the teacher was eligible for unemployment insurance during the 
summer breaks. ^^ 

The court of appeals set forth the statutory framework^^ and found that the 
Board's decision was incorrect. ^^^ In doing so, the court relied heavily on 
legislative intent that the Head Start program be treated as an educational 
institution for the purpose of unemployment compensation. ^^^ 

Judge Riley's dissenting opinion stated that the majority failed to follow its 
quoted standard of review that the reviewing court should defer to the agency 
charged with enforcing a statute when the court is faced with two reasonable 
interpretations. ^^^ Judge Riley listed several reasons why she believed that the 
educational aspect of the Head Start program was incidental to its primary 
purpose of bringing the children to a level of social development where they 
would be better equipped to deal with the environment of the traditional 
school. ^^^ Therefore, Judge Riley concluded that the Board's interpretation was 
reasonable and she would have affirmed that decision. ^^"^ 

In another case during the survey period, the court of appeals found that the 
Worker's Compensation Board's interpretation of a statute providing death 
benefits was reasonable. ^°^ There was no modem case law on point as to whether 
a separated spouse was entitled to death benefits and the Board determined that 
the living arrangement did not satisfy the statutory requirements for 
compensation as a presumptive dependent. '^^ 

E. Summary Judgment 

When a reviewing court is faced with a motion for summary judgment, the 
court of appeals noted that in addition to the summary judgment standard set 
forth under Trial Rule 56, when the "procedural requirements are satisfied, a 
judgment of an administrative board is deemed prima facie correct." ^^^ 

96. Id. at 32. 

97. Id. at 32-33 (referencing iNfD. CODE § 22-4-14-7(a)(l) (2007)). 

98. Mat 30-31. 

99. Mat 32. 

100. Id. at 34-35. 

101. Id. 

102. Id. at 36 (Riley, J., dissenting). 

103. Id. 

104. Id. 

105. Gonzalez v. Wal-Mart Assocs., 881 N.E.2d 19, 24-25 (Ind. Ct. App. 2008). 

106. Id. 

107. Thomberry v. City of Hobart, 887 N.E.2d 1 10, 1 1 8 (Ind. Ct. App.) (citing Wiebke v. City 

798 INDIANA LAW REVIEW [Vol. 42:789 

F. Subject Matter Jurisdiction 

With limited exceptions, the subject matter jurisdiction of courts to review 
agency decisions requires the party seeking review to exhaust its administrative 
remedies. Whether a party has done so is an issue that frequently arises in 
administrative law cases. The court of appeals discussed the genesis of the 
exhaustion of administrative remedies doctrine in LHT Capital, LLC v. Indiana 
Horse Racing Commission }^^ The court reviewed the AOPA exhaustion of 
remedies requirements codified at Indiana Code section 4-2 1.5 -5 -4(a) and the 
Indiana Supreme Court' s cases discussing the policy reasons for the doctrine and 
considerations of judicial economy. ^^^ 

In LHT, a minority interest holder in a race track sought review of the horse 
racing commission's order imposing a transfer fee on divestment of the minority 
interest holder' s interest. ^ ^^ The court of appeals found that the minority interest 
holder had not exhausted its administrative remedies. The minority interest 
holder conceded that it did not raise challenges to the transfer fee at the formal 
hearing, but relied upon other evidence and communications in which it had 
raised the issue with the Board. ^" 

The minority interest holder argued in the alternative that exhausting its 
administrative remedies would have been futile, and futility is an exception to the 
exhaustion of remedies requirement.* ^^ In order to meet the requirements of the 
futility exception "'one must show that the administrative agency was powerless 
to effect a remedy or that it would have been impossible or fruitless and of no 
value under the circumstances.'"**^ 

The minority interest holder argued that the commission "informed [the 
minority interest holder] that the Commission had 'declined to hear any challenge 
to the validity and constitutionality of its transfer tax issue.'"**"* However, those 
communications had allegedly taken place outside of the hearing and there was 
no evidence in the record of the communications.**^ The court of appeals 
therefore found that LHT had failed to demonstrate that presentation to the 
commission would have been futile.**^ 

LHT also argued that it was not required to exhaust its administrative 

of Fort Wayne, 263 N.E.2d 379, 383 (Ind. Ct. App. 1970)), trans, denied, 898 N.E.2d 1226 (Ind. 

108. 891 N.E.2d 646, 652 (Ind. Ct. App.), reh 'g denied, 895 N.E.2d 124 (Ind. Ct. App. 2008). 

109. Id. 

110. /J. at 650-51. 

111. /J. at 653. 

112. /J. at 654. 

113. Id. (quoting Johnson v. Celebration Fireworks, 829 N.E.2d 979, 984 (Ind. 2005)). 

114. Id. 

115. Id. 

116. Id. 


remedies because the rule was facially invalid or unconstitutional.**^ The court 
of appeals acknowledged the Indiana Supreme Court precedent that, under some 
circumstances, litigants may bypass the exhaustion requirement where "'a statute 
is void on its face' and 'if an agency's action is challenged to be ultra vires and 
void.'"* *^ The court of appeals distinguished LHT's actions from those in other 
Indiana cases because LHT did not file a declaratory judgment action challenging 
the regulation.**^ The court of appeals also noted that LHT filed a petition with 
the commission and negotiated an agreement that allowed for "a quick 
resolution."*^^ The court concluded that 

this is a case where ''[e]ven if the ground of the complaint is the 
unconstitutionality of the statute, which may be beyond the agency's 
power to resolve, the exhaustion of administrative remedies may still be 
required because the administrative action may resolve the case on other 
grounds without confronting broader legal issues."*^* 

Having accepted the benefits of the agreement with the commission, LHT could 
not subsequently litigate that the terms were unconstitutional.*^^ 

A similar result was reached in Goldstein v. Indiana Department of Local 
Government Finance }^^ In Goldstein, homeowners filed a petition for judicial 
review in the Indiana Tax Court challenging the legality of a vote increasing the 
county's income tax and asserting other constitutional claims related to property 
tax and assessment.*^"* The Indiana Tax Court found that it did not have subject 
matter jurisdiction to hear the dispute because the petitioners had failed to 
exhaust their administrative remedies. *^^ 

The court noted that "[s]ubject matter jurisdiction is the power of a court to 
hear and determine a particular class of cases." *^^ The tax court further stated 
that "[s]ubject matter jurisdiction is not conferred upon a court by consent or 
agreement of the parties to litigation; rather, it can only be conferred upon a court 
by the Indiana Constitution or by statute."*^^ Under Indiana Code section 33-26- 
3-1 the "tax court has exclusive jurisdiction over any case that arises under the 
tax laws of Indiana and that is an initial appeal of a final determination made by: 
(1) the department of state revenue . . . ; or (2) the Indiana board of tax 

117. Id. 

118. Id. (quoting Ind. Dep't of Evtl. Mgmt. v. Twin Eagle L.L.C., 798 N.E.2d 839, 844 (Ind. 

119. /^. at 655-56. 

120. /^. at 656. 

121. Id. (quoting Twin Eagle, 798 N.E.2d at 844). 

122. Id 

123. 876 N.E.2d 391 (Ind. Tax Ct. 2007). 

124. /^. at 392. 

125. /d at 396. 

126. Id. at 393 (citing K.S. v. State, 849 N.E.2d 538, 540 (Ind. 2006)). 

127. Id (citing State v. Sproles, 672 N.E.2d 1353, 1356 (Ind. 1996)). 

800 INDIANA LAW REVIEW [Vol. 42:789 


The homeowners argued that they should be exempt from the final 
determination requirement for three reasons /^^ The homeowners claimed that 
exhausting their administrative remedies would be either inadequate or futile 
because neither the Department of State Revenue nor the Indiana State Board of 
Tax Review were "empowered to rule on the 'global' constitutional challenges 
that they . . . raised." ^^^ The tax court admitted that the Indiana Supreme Court 
*'has acknowledged that construing Indiana's constitution 'is not the job, nor an 
area of expertise' of Indiana's administrative tax agencies."^^^ However, the tax 
court cited additional authority from the Indiana Supreme Court that "taxpayers, 
including those raising pure constitutional claims, must first pursue the 
administrative procedures as established by the Legislature." ^^^ 

The constitutional issue exception was successfully applied in Miller P^ In 
that case, however, the court was trying to prevent an application of waiver to a 
litigant who had not received the due process to which he was entitled. ^^"^ 

The homeowners in Goldstein also claimed that they should be excused from 
exhaustion of administrative remedies because the issues they raised were of 
such "unparalleled public interest" that they warranted an immediate ruling on 
the merits by the tax court. ^^^ The court of appeals acknowledged the Indiana 
Supreme Court's action in ruling on claims of taxpayers resulting from 
assessment issues,'^^ but the court found that it simply did not have subject 
matter jurisdiction in this case.*^^ 

Finally, the court of appeals rejected the homeowners' claims that the court 
might have jurisdiction under Indiana Code section 36-4-4-5.^^^ The tax court 
found that Indiana Code section 36-4-4-5 relates "to a court of general 
jurisdiction's authority to assign responsibility for an act to the appropriate 
executive or legislative body."'^^ 

G. Filing the Record and Other Procedural Issues 
MicroVote General Corp. v. Office of the Secretary ofState^^^ affirms that 

128. IND. Code § 33-26-3-1 (2008). 

129. Goldstein, 876 N.E.2d at 394-96. 

130. Mat 394. 

131. Id. (citing Sproles, 672 N.E.2d at 1356). 

132. Id. (emphasis omitted). 

133. See discussion infra Part II.B.5. 

134. Miller v. Ind. Dep't of Workforce Dev., 878 N.E.2d 346, 353 (Ind. Ct. App. 2007). 

135. Goldstein, 876 N.E.2d at 394-95. 

136. Id. at 395 (discussing State ex ret. Atty. Gen. v. Lake Superior Court, 820 N.E.2d 1240 
(Ind. 2005)). 

137. Id. 

138. Id. 

139. Id. at 396 (citing iND. CODE § 36-4-4-5 (2007)). 

140. 890 N.E.2d 21 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1227 (Ind. 2008). 


the failure of a party seeking judicial review to file the agency record, or request 
an extension, within the thirty days allowed by AOPA subjects the case to 
dismissal. ^"^^ In MicroVote, a voting machine corporation sought to challenge a 
determination by the Secretary of State, but did not attach the evidentiary record 
relied upon by the ALJ and the Secretary of State. ^"^^ 

The voting machine corporation argued that it had substantially complied 
with the requirement to file the record. ^"^^ Under the precedent from Izaak 
Walton League "less-than-full compliance" with AOPA's requirements may be 
acceptable if the materials which are submitted provide the reviewing court with 
all that is necessary in order to accurately assess the challenged agency action.'"^ 
In MicroVote, however, the court of appeals determined that the submitted 
materials did not meet this standard. '"^^ 

The voting machine corporation also alleged that the doctrine of equitable 
estoppel excused its late filing. ^"^^ The claim was rejected by the court of 
appeals. ^"^^ 

The court found that alleged mistakes made by the trial court personnel could 
not form the basis of a claim of equitable estoppel because neither the trial court 
nor its personnel were parties to the litigation. ^"^^ The court also rejected an 
estoppel claim with regard to the Secretary of State. ^"^^ The court stated that the 
voting machine corporation was responsible for managing its case and should 
have requested an extension when it became clear that the Secretary of State's 
office would not be able to prepare the agency record within the thirty day time 
frame. ^^^ 

The petitioner in Wrogeman v. Roob^^^ also advanced a substantial 
compliance argument. ^^^ As in MicroVote, the court of appeals held that the 
petitioner had not sufficiently complied with requirements to file the agency 
record because it only submitted one document from the agency record. ^^^ 

H. Standing 
An issue of standing arose in Burcham v. Metropolitan Board of Zoning 

141. /J. at 25. 

142. Id at 21. 

143. Id. at 26 (citing Izaak Walton League of Am., Inc. v. DeKalb County Surveyor's Office, 
850 N.E.2d 957, 965 (Ind. Ct. App. 2006)). 

144. Id. (citing Izaak Walton League, 850 N.E.2d at 965). 

145. Id. at 27. 

146. Id. For a discussion of the doctrine of estoppel, see infra Part II.F. 

147. MicroVote, 890 N.E.2d at 28. 

148. Id. 

149. Id. 

150. Id. 

151. 877 N.E.2d 219 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 41 (Ind. 2008). 

152. /J. at 220-21. 

153. Mat 222. 

802 INDIANA LAW REVIEW [Vol. 42:789 

Appeals Division of Marion County .^^"^ Two property owners and a community 
association appealed an order granting a zoning variance to a fireworks 
retailer. ^^^ The court of appeals reversed the BZA's initial decision because the 
BZA's findings were not supported by the evidence. ^^^ The fireworks retailer 
then filed a declaratory judgment action to determine whether the BZA had 
jurisdiction to amend its prior findings, and the trial court found that it did.^^^ 

The BZA subsequently modified its previous findings of fact, and the 
community association sought judicial review. ^^^ After the trial court affirmed 
the BZA's modification, the community association appealed. ^^^ Because the 
two individual property owners were voluntarily dismissed from the appeal, the 
BZA and the fireworks retailer asserted that the community association no longer 
had standing to pursue the appeal. ^^^ 

The court of appeals in Burcham clarified a line of cases which have 
incorrectly held that standing "'may be raised at any point during the litigation 
and if not raised by the parties it is the duty of the reviewing court to determine 
the issue sua sponte'''^^^ The court stated that standing can be "'waived by the 
failure to make a timely objection.'"^^^ However, in this case, the community 
association was not given the opportunity to litigate the standing issue in the trial 
court, and therefore the issue of standing was waived. ^^^ 

A different standing issue was presented in Sexton v. Jackson County Board 
of Zoning Appeals}^ In Sexton the issue was whether the neighbors were 
"aggrieved" by the BZA's decision granting a special exception to build and 
operate a concentrated animal feeding operation. ^^^ Surrounding homeowners 
had presented evidence that they would suffer a pecuniary loss if the permit was 
granted, which was sufficient to establish standing to petition for writ of 
certiorari. ^^^ 

/. Supplementation of Record 
In general, parties may not supplement the agency record during the judicial 

154. 883 N.E.2d 204, 207 (Ind. Ct. App. 2008). 

155. /J. at 207-08. 

156. Mat 208. 

157. Mat 208-09. 

158. Id. 

159. Mat 209-10. 

160. M. at 210. 

161. Id. at 211 (quoting In re City of Fort Wayne, 381 N.E.2d 1093, 1095 (Ind. Ct. App. 

162. Id. (quoting Wildwood Park Cmty. Ass'n v. Fort Wayne City Plan Comm'n, 396 N.E.2d 
678, 681 (Ind. Ct. App. 1979)). 

163. M. at 212. 

164. 884 N.E.2d 889 (Ind. Ct. App. 2008). 

165. M. at 893. 

166. M. at 894. 


review stage of a proceeding; however, two cases addressed supplementation of 
the record during the survey period. In Sexton, homeowners who alleged a 
violation of Indiana's Open Door law should have been allowed to supplement 
the record on judicial review to include a videotape of the hearing where the 
alleged violation occurred. ^^^ In Burcham, the reviewing court did not abuse its 
discretion by refusing to admit supplemental evidence because the proponent of 
the evidence did not show that it was prejudiced by exclusion of the 
information. ^^^ 

/. Remand and Reversals 

In Burcham, the court of appeals reversed, but did not remand, an appeal of 
a BZA decision. The effect was to vacate and nullify the trial court's decision. 
"The parties [were] then restored to the position they held before the judgment 
was pronounced and [ordered to] take their places in the trial court at the point 
where the error occurred, and proceed to a decision. '"^^^ 

In Jackson v. Indiana Family & Social Services Administration,^^^ the court 
of appeals stated that the trial court should remand to agency for further fact 
finding under Indiana Code section 4-2 1.5-5-1 2(b) when a relevant law or policy 
changes in a way that could alter the outcome of a case.^^^ 

n. Agency Action 

The next group of cases this Survey discusses address issues other than those 
falling under judicial review such as scope of agency action and adjudications. 

A. Scope of Agency Action 

As purely statutory creations, the power of administrative agencies is 
generally considered to be limited to those powers explicitly granted by statute. 
There are some exceptions to this general rule, however. For example, in Jet 
Credit Union v. Loudermilk,^^^ the court of appeals held that an administrative 
agency could issue an opinion letter even without explicit statutory authority to 
do so.^^^ Jet Credit Union sought advice from the Indiana Department of 
Financial Institutions (DFI) on whether to permit a withdrawal of funds by a 
director and officer who was liable to the credit union. ^^"^ The member, 

167. /d at 894-95. 

168. Burcham,SS3N.E.2da.t2\3. 

169. Id. at 215 n.3 (quoting Grand Trunk W. R.R. Co. v. Kapitan, 698 N.E.2d 363, 366 (Ind. 
Ct. App. 1998)). 

170. 884 N.E.2d 284 (Ind. Ct. App. 2008). 

171. Id. at 292. The court of appeals also found that the trial court abused its discretion by 
dissolving a stay it had entered under Indiana Code section 4-21.5-5-9. Id. at 293. 

172. 879 N.E.2d 594 (Ind. Ct. App.), trans, denied, 891 N.E.2d 49 (Ind. 2008). 

173. /^. at 598. 

174. Id. at 596. 

804 CsTDIANA LAW REVIEW [Vol. 42:789 

Loudermilk, charged Jet with conversion and Jet sought to rely upon the opinion 
letter from DPI. ^^^ 

The court of appeals held that administrative agencies have "broad authority 
to interpret and enforce pertinent statutes."^^^ Even though there was nothing 
explicitly authorizing or prohibiting DFI's interpretation of the statute, the court 
declined to hold that "an administrative agency necessarily 'oversteps' its 
authority anytime it interprets a statute." ^^^ 

hi another case supporting broad agency powers, the court of appeals found 
that the Indiana Attorney General's Office was not prevented from enforcing a 
nonresident's compliance with an information request through Indiana courts 
because of lack of personal jurisdiction. ^^^ 

Conflicts between state and federal regulatory authority also can arise. In 
South Haven, the issue was whether state regulatory authority was preempted by 
federal authority. ^^^ The court of appeals found that a consent decree from the 
EPA imposing obligations on a utility to obtain an approval from the EPA before 
expanding its territory did not interfere with the state agency's regulatory 
authority. ^^^ The court of appeals stated that the utility voluntarily assumed 
additional controls over its operation and the lURC was still empowered to make 
the ultimate decision on whether to grant the utility's request for expansion. ^^^ 

B. Adjudications 

1. Scope of Adjudication. — Questions can arise regarding whether an agency 
has authority to take a particular action. Christopher R. Brown, D.D.S. v. 
Decatur County Memorial Hospital^^^ presented an interesting contrast to the 
court of appeals' decision in Jet. In Brown, the Indiana Supreme Court held that 
the Worker's Compensation Board cannot award prejudgment interest in the 
absence of express statutory authority. ^^^ The statute in question was silent on 
the issue of prejudgment interest so the Board awarded prejudgment interest 
because the statute did not expressly prevent it.^^"^ 

Although the supreme court noted the deferential standard of review for 
interpretations of a statute by the administrative agency charged with the statute' s 
enforcement, the court found that the Board's determination was erroneous. ^^^ 
The court recognized that the workers compensation statute is in derogation of 

175. /J. at 597. 

176. Mat 598. 

177. Id. 

178. Everdry Mktg. & Mgmt., Inc. v. Carter, 885 N.E.2d 6, 15 (Ind. Ct. App. 2008). 

179. In re S. Haven Sewer Works, Inc., 880 N.E.2d 706, 712 (Ind. Ct. App. 2008). 

180. Id. 

181. Id. 

182. 892 N.E.2d 642 (Ind. 2008). 

183. /J. at 644. 

184. Mat 646. 

185. Mat 650. 


common law.'^^ The court also found that the question presented called for a 
policy determination — and the court should be hesitant to disturb the ''delicate 
balance the General Assembly has reached."^^^ 

In Employee Benefit, a company engaged in managing the funding and 
administration of self-funded employee benefits plans claimed the Department 
of Insurance lacked subject matter jurisdiction to regulate it because it was not 
an "insurance company" as defined by Indiana Code.^^^ After analyzing the 
statutes involved, the court of appeals determined "for all practical purposes, [the 
company] was involved in health insurance." ^^^ However, the court also relied 
upon a prior agreed entry the company had entered into with the Department to 
avoid license revocation and protect the "insured" and found that the Department 
had authority to ensure compliance with the agreement or revoke insurance 
licenses in the event of non-compliance. ^^^ 

2. Due Process. — "The fundamental requirement of due process is the 
opportunity to be heard at a meaningful time and in a meaningful manner. '"'^^ 
In Miller, the court of appeals found that a claimant for unemployment benefits 
had not received due process when the purpose of the hearing was different than 
what had been stated in a letter the claimant had received prior to the hearing. ^^^ 

The court of appeals rejected all of the arguments the appellees advanced to 
address the due process issue. ^^^ Notice of the issues to be decided was not only 
required under the department's regulations, but was also a "fundamental 
requirement of a fair hearing."^^"^ The court found that the notice the claimant 
received, which discussed whether he had been looking for work, did not 
adequately identify the issue of whether or not he had been terminated for just 



The most interesting legal argument, however, related to waiver. The 
appellees argued that the claimant had waived any lack of due process by "failing 
to lodge a formal objection" at the time of the hearing and again on appeal of the 
determination to the Review Board. ^^^ The court of appeals noted that parties can 
waive constitutional issues if they are raised for the first time on appeal. ^^^ 

186. Mat 649. 

187. Id. 

188. Employee Benefit Managers, Inc. of Am. v. Ind. Dep't of Ins., 882 N.E.2d 230, 236 (Ind. 
Ct. App.), trans, denied, 898 N.E.2d 1217 (Ind. 2008). 

189. Id. 

190. Id. 

191. Miller v. Ind. Dep't of Workforce Dev., 878 N.E.2d 346, 351 (Ind. Ct. App. 2007) 
(quoting NOW Courier, Inc. v. Review Bd. of Ind. Dep't of Workforce Dev., 871 N.E.2d 384, 387 
(Ind. Ct. App. 2007)). 

192. /J. at 354. 

193. Mat 35 1-54. 

194. Id. at 352 (citing FTC v. Nat'l Lead Co., 352 U.S. 419 (1957)). 

195. M. at 352-53. 

196. M. at 353. 

197. Id. (citing Hite v. Vanderburgh County Office of Family & Children, 845 N.E.2d 175, 

806 INDIANA LAW REVIEW [Vol. 42:789 

However, the court noted that it had "previously declined to find waiver of an 
issue not raised in an administrative proceeding where resolution of the issue did 
not require any factual determinations, and required only legal conclusions."*^^ 
The court also excused the claimant's failure to exhaust his administrative 
remedies by raising the due process argument at the Review Board, because "the 
question presented is strictly constitutional."'^^ The court of appeals declined to 
invoke waiver, concluding that the transcript clearly showed that the claimant 
alerted the ALJ to his lack of notice, the issue was strictly legal, and the first time 
the claimant had legal counsel was on appeal.^^ 

A due process argument was raised, but summarily rejected, in Employee 
Benefit }'^^ An insurer contended it was denied due process when the Department 
of Insurance failed to hold an additional compliance hearing for the purpose of 
allowing the insurer to show the significant steps it was making toward 
compliance.^^^ The court of appeals found that the insurer had a fair opportunity 
to be heard without the additional compliance hearing.^^^ The insurer had ample 
opportunities to present evidence at three prior hearings, and the insurer failed 
to claim that it would present dispositive evidence in a future hearing.^^"^ 

3. Hearsay. — Highland Town School Corp. v. Review Board of the Indiana 
Department of Workforce Developmenf^^ addressed hearsay objections. The 
court of appeals stated that "parties who proceed pro se are afforded more leeway 
in an administrative context than in a judicial one."^^^ The applicant, for 
example, did not have to say "hearsay" in making his objections, but he did have 
to clearly indicate the substantive basis of his objections. ^^^ The court of appeals 
found that the applicant in Highland did not clearly indicate he was objecting on 
the basis of hearsay.^^^ 

4. Ascertainable Standards. — An issue regarding ascertainable standards 
was raised in Construction Management. ^^^ "Decisions of administrative 
agencies must be based on ascertainable standards to protect against arbitrary and 

180(Ind. Ct. App. 2006)). 

198. Id. (citingTokheimCorp. V. Review Bd. of Ind. Employment Sec. Div., 440 N.E.2d 1141, 
1142(Ind. Ct. App. 1982)). 

199. Id. (citing Wilson v. Bd. of Ind. Employment Sec. Div., 385 N.E.2d 438, 441 (Ind. 

200. Id. at 354. 

201 . Employee Benefit Managers, Inc. of Am. v. Ind. Dep't of Ins., 882 N.E.2d 230, 237 (Ind. 
Ct. App.), trans, denied, 898 N.E.2d 1217 (Ind. 2008). 

202. Id. at 237-38. 

203. Id. at 238. 

204. /t/. at 237. 

205. 892 N.E.2d 652 (Ind. Ct. App. 2008). 

206. Id. at 656. 

207. Id. 

208. Id. 

209. Ind. Dep't of Envtl. Mgmt. v. Constr. Mgmt. Assoc, 890 N.E.2d 107, 1 14 (Ind. Ct. App. 


capricious decisions. Such standards are also necessary to give fair warning as 
to what factors agencies consider in making decisions."^^^ The construction 
company to be regulated challenged IDEM's interpretation of a regulation, 
claiming IDEM expanded the definition to include a measure of ownership, 
operation, or proximity without the usual process of notification and adoption of 
the regulation.^ ^* The court of appeals rejected this challenge, however, and 
found that the regulation contained all necessary guidance.^^^ 

5. Findings Sufficient to Support Judgment. — A claimant for unemployment 
benefits challenged the sufficiency of the Department of Workforce 
Development's findings in Miller v. Indiana Department of Workforce 
Development?^^ A labor agreement between the claimant and his employer 
stated that employees could be terminated for gross negligence.^^'* The 
Department issued findings supporting the employee's termination pursuant to 
the agreement, even though its findings indicated the employee had only been 
negligent.^^^ The court of appeals therefore found that the Department' s findings 
were insufficient to support its judgment.^ ^^ 

C Administrative Collateral Estoppel 

Uylaki V. Town ofGriffith^^^ presented an issue of administrative collateral 
estoppel. A town employee sought unemployment benefits after he was 
discharged.^^^ The Department of Workforce Development determined that the 
employee had been terminated for just cause and was not eligible for benefits.^^^ 
The employee appealed the ruling to an ALJ and to the Department's Review 
Board, both of which agreed with the initial decision.^^^ The employee did not 
seek judicial review, instead, he filed a wrongful discharge action against the 
town.^^^ The town contended the wrongful discharge action was precluded on the 
grounds of administrative collateral estoppel.^^^ The trial court and court of 
appeals agreed.^^^ 

The court of appeals applied a four part test to determine whether 

210. Id. (citing State Bd. of Tax Comm'rs v. New Castle Lodge # 147, Loyal Order of Moose, 
Inc., 765 N.E.2d 1257, 1264 (Ind. 2002)). 

211. /J. at 114. 

212. /J. at 114-15. 

213. 878 N.E.2d 346, 349 (Ind. Ct. App. 2007). 

214. Mat 349-50. 

215. Mat 356. 

216. M. at 356-57. 

217. 878N.E.2d412(Ind.Ct. App. 2007). 

218. M. at 413. 

219. Id. 

220. M. at 413-14. 

221. Id. Sit 414. 
111. Id. 

ITh. M. at 414-15. 

808 INDIANA LAW REVIEW [Vol. 42:789 

administrative collateral estoppel applies to bar a plaintiffs claim. The test 

1) whether the issues sought to be estopped were within the statutory 
jurisdiction of the agency; 2) whether the agency was acting in a judicial 
capacity; 3) whether both parties had a fair opportunity to litigate the 
issues; 4) whether the decision of the administrative tribunal could be 
appealed to a judicial tribunal.^^"^ 

The only factor which gave the court of appeals any pause was whether the 
employee "had a fair opportunity to litigate the issue of whether [he] was 
discharged for just cause."^^^ The court of appeals found there was "no 
indication that [the employee] was prevented from submitting any evidence or 
calling witnesses on his behalf," and therefore had a fair opportunity to litigate.^^^ 

D. Minutes/Records 

The court of appeals held that an administrative agency could supplement its 
minutes by affidavit in a declaratory judgment action.^^^ Although the court cited 
the black letter law that "[i]n general, boards and commissions speak or act 
officially only through the minutes and records made at duly organized 
meetings, *'^^^ the court found that evidence that is introduced to '''supplement the 
minutes is properly admissible. '"^^^ 

E. Correcting Errors 

Although there is no statute directly authorizing a zoning board to correct 
clerical errors in its orders, the court of appeals applied general administrative 
law principles, including those contained in the AOPA, to hold that a zoning 
board can correct clerical errors. ^^^ 

E. Estoppel 

Two cases concerning estoppel issues arose during the review period. In 
Terra Nova Dairy, LLC v. Wabash County Board of Zoning, ^^^ an owner of a 
dairy alleged a BZA should be equitably estopped from imposing certain 

224. Id. at 414 (citing McClanahan v. Remington Freight Lines, Inc. 517 N.E.2d 390, 394 
(Ind. 1988)). 

225. Id. 

226. /^. at 415. 

227. Pressley v. Newburgh Town Council, 887 N.E.2d 1012, 1016 (Ind. Ct. App. 2008). 

228. Id. (citing Borsuk v. Town of St. John, 820 N.E.2d 1 18, 123 (Ind. 2005)). 

229. Id. (quoting Borsuk, 820 N.E.2d at 123). 

230. Burcham v. Metro. Bd. of Zoning Appeals Div. I of Marion County, 883 N.E.2d 204, 
215-16(Ind.Ct. App. 2008). 

231. 890 N.E.2d 98 (Ind. Ct. App. 2008). 


requirements of a zoning ordinance. ^^^ Despite the fact that the dairy had 
received a copy of an outdated ordinance from the BZA director, the court of 
appeals held that the BZA was not equitably estopped.^^^ The court reasoned that 
the dairy, as property owner, is '"charged with knowledge of the zoning 
ordinance that affects [its] property. '"^^"^ The court also found that the dairy did 
not rely on the information in the outdated ordinance. ^^^ 

A different result was reached in City of Charlestown Advisory Planning 
Commission v. KB J, L.L.CP^ A city planning commission approved plans for 
a subdivision that was within the two-mile fringe of the city, even though the 
plans did not comply with the city zoning ordinance.^^^ A few months later, the 
subdivision was annexed into the city.^^^ The developer of the subdivision 
subsequently sought approval of some minor changes of the subdivision plan, and 
the Planning Commission approved the replat.^^^ After litigation arose between 
the developer and the City which revealed that neither party had a copy of the 
original plat, the developer submitted another plat for appro val.^"^^ The Planning 
Commission refused to approve the plat because it did not comply with the city 
zoning ordinance. ^"^^ 

The court of appeals found that this was one of the rare times that a 
government entity was equitably estopped from asserting that the subdivision 
plans did not comply with the city ordinance. ^"^^ The court of appeals 
distinguishtdEquicor Development Inc. v. Westfield-Washington Township Plan 
Commission, because that case involved approval of "similarly situated" non- 
conforming plats, rather than past approval of the same non-conforming plat.^"^^ 
It was also significant to the court that over thirty homes in the subdivision had 
already been built.^"^"^ 

The court also rejected the Planning Commission's argument that it lacked 
subject matter jurisdiction to approve the original plat, characterizing the 
Commission's action as a legal error that the Commission failed to timely 

232. Mat 105. 

233. /J. at 105-06. 

234. Id. at 105 (quoting Story Bed & Breakfast L.L.P. v. Brown County Area Plan Comm'n, 
819 N.E.2d 55, 64 (Ind. 2004)). 

235. Mat 106. 

236. 879 N.E.2d 599 (Ind. Ct. App. 2008). 

237. Mat 600. 

238. Id. 

239. M. at 600-01. 

240. M. at 601. 

241. Id. 

242. M. at 603. 

243. Id. at 602-03 (citing Equicor Dev. Inc. v. Westfield-Washington Twp. Plan Comm'n, 758 
N.E.2d 34 (Ind. 2001)). 

244. M. at 603. 

245. M. at 602-03. 

810 INDIANA LAW REVIEW [Vol. 42:789 

G. Attorney Fees 

A developer in City of Charlestown sought attorney fees against a planning 
commission. The court of appeals held that the developer was not entitled to 
attorney fees under Indiana Code section 36-7-4-1010(a).^'^^ The court of appeals 
held that the statute referred only to costs, which does not encompass attorney 


m. Indiana's Open Door Law 

Indiana's Open Door Law provides that "official action" must be conducted 
at an open meeting.^"^^ 'The purpose of Indiana's Open Door Law is to ensure 
that the * official action of public agencies' is conducted openly so that the 
general public may be fully informed."^"^^ Several cases concerning Indiana's 
Open Door Law arose during the survey period, however, each illustrates how 
difficult it is to reverse agency action. 

In Thomberry v. City ofHobarf^^ a police officer appealed the decision by 
the Hobart Public Works & Safety Board to terminate his employment.^^^ The 
Board held evidentiary hearings on three dates, but on a subsequent date, two 
members of the Board met and listened to forty-five minutes of audio tape from 
one of the prior public hearings. ^^^ The Public Access Counselor determined that 
the Board members' meeting amounted to an "executive session" that had not 
properly been noticed under the Open Door Law.^^^ 

The Board subsequently reconsidered the matter at a properly noticed 
executive session and a public meeting and reached the same decision to 
terminate the police officer. ^^"^ The trial court found that there had been a 
technical violation of the Open Door Law, but upheld the Board's decision to 
terminate the police officer.^^^ The court of appeals affirmed.^^^ 

The burden of proof is with the plaintiff to show that final action should be 
voided.^^^ In Thomberry, the court of appeals found that "voiding the final 

246. City of Charlestown Advisory Planning Comm'n v. KBJ, L.L.C., 879 N.E.2d 599, 604 
(Ind. Ct. App. 2008). 

247. Id. 

248. Ind. Code § 5-14-1.5-2(d)(5)-(6) (2005). 

249. Lake County Trust, 883 N.E.2d at 135 (quoting City of Gary v. McCrady, 851 N.E.2d 
359, 365 (Ind. Ct. App. 2006)). 

250. 887 N.E.2d 1 10 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1226 (Ind. 2008). 

251. /^. at 113. 

252. Mat 115. 

253. Id. 

254. Id. 

255. Mat 116. 

256. M. at 118. 

257. Id. at 117; see also iND. CODE § 5-14-1. 5-7(d) (2005) (discussing factors on which a 
reviewing court should rely). 


action would merely require the Board to reconsider the same evidence for a 
third time . . . [and] would only serve to impose punishment at the public's 
expense for a technical violation of the Open Door Law."^^^ 

In another case concerning a police officer, Guzik v. Town of St. John,^^^ the 
officer who was accused of misconduct alleged an open door violation when the 
notice of the Police Commission's executive session did not indicate that job 
performance evaluations and an individual's status as an employee would be the 
subject of the executive session.^^^ The Police Commission subsequently notified 
the public of the executive session and prepared minutes that noted the omission 
of the additional subject matter of the meeting.^^^ The Police Commission also 
held another special meeting, during which it advised the public of the 
information received and the action that was taken during the executive 

The court of appeals did not determine whether any technical violation of the 
Open Door Law had occurred, but instead found that any violation was cured by 
the Police Commission' s subsequent actions. ^^^ Any violation "did not affect the 
substance of any decisions, policies, or final actions because none were made, 
established, or taken" during the executive session.^^"^ 

The court of appeals did not address whether a due process violation had 
occurred in Guzik because the police officer had no notice that he was to be 
accused of misconduct and had no legal representation at the executive session.^^^ 
The court of appeals did reject the police officer's claims of due process 
violations founded on Indiana Code section 36-8-9-4(c) and a claim that his 
resignation was a product of duress. ^^^ 

rv. Statutory Changes 

A few statutory changes to AOPA, the Open Door Law or Open Records Act 
took effect during the survey period. Most of the changes are clarifications, such 
as those in Indiana Code sections 4-21.5-3.5-8, 4-21.5-4-5 and 4-21.5-7-5. The 
Open Records Act had the most changes. The Open Door and Open Records Act 
were amended to include the ports of Indiana and State Department of 

258. Thomberry, 887 N.E.2d at 1 18. 

259. 875 N.E.2d 258 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 47 (Ind. 2008). 

260. Id. at 270. 

261. Id.aX210-ll. 

262. Mat 271. 

263. Mat 271-72. 

264. Id. at 272. 

265. /J. at 267-68. 

266. Id. at 268. 

812 INDIANA LAW REVIEW [Vol. 42:789 

Agriculture in the exemption regarding negotiations with industrial or 
commercial prospects.^^^ Other changes to the Open Records Act included a new 
definition of "offender,"^^^ including of the Indiana Horse Racing Commission 
as a public agency,^^^ and a definition for the actual cost of copying.^^^ 

267. IND. Code §§ 5-14-1.5-6.1, 5-14-3-4(b)(5)(a), 5-14-3-4.9 (2005 & Supp. 2008). 

268. Id. § 5-14-3-2(i). 

269. Id. § 5-14-3-2(m)(10). 

270. Id. §5-14-3-8(d)(2). 

Developments in Indiana Appellate Procedure: 
Rule Amendments, Notable Case Law, 
AND Tips for Appellate Practitioners 

Bryan H. Babb' 
Kellie M. Barr* 


The Indiana Rules of Appellate Procedure (Appellate Rules) were adopted 
in 2000. Each year, the Appellate Rules are defined, refined, and enhanced by 
the Indiana Supreme Court (supreme court) and the Indiana Court of Appeals 
(court of appeals) through rule amendments and appellate decisions. This Article 
tracks notable developments in appellate procedure between October 1 , 2007 and 
September 30, 2008, by summarizing rule amendments, examining court opinions 
affecting appellate procedure, and synthesizing the case law to provide tips to 
practitioners for improving their appellate practice. 

I. Rule Amendments 

This past year the supreme court made substantive amendments to Appellate 
Rules 9, 15, 23, 53, and Form 15-1.' The supreme court added Appellate Rule 
14.1, which creates a new expedited process for certain appeals involving 
juveniles.^ The supreme court also added Administrative Rule 9(G), which 
addresses court records excluded from public access in appellate proceedings.^ 
All of these amendments went into effect on January 1, 2009. 

* Partner, Bose McKinney & Evans LLP; Co-chair of the firm's Appellate Practice Group; 
United States Military Academy (B.S. 1989); Boston University (M.S.B.A. 1994); Indiana 
University Maurer School of Law (J.D. cum laude, 1999); Editor-in-Chief, Vol. 74, Indiana Law 
Journal; Law Clerk to Justice Frank Sullivan of the Indiana Supreme Court (1999-2000); Indiana 
State Bar Association Appellate Practice Section (Council member: 2005-2007); Indianapolis Bar 
Association (Chair, Appellate Practice Section; Chair, Amicus Curiae Committee, 2007-2008); The 
Best Lawyers in America®, 2008-2009; Indiana Super Lawyer®, 2009. 

** Associate, Bose McKinney & Evans LLP; Indiana University - Bloomington (B.A. 
2003); Indiana University Maurer School of Law (J.D. 2006); Chief Justice, Moot Court Board; 
Articles Editor, Vol. 81, Indiana Law Journal; Law Clerk to Chief Judge John G. Baker, Indiana 
Court of Appeals (2006-2008). 

1. See Order Amending Indiana Rules of Appellate Procedure, No. 94S00-0810-MS-15 
(Ind. Oct. 6, 2008), available at 
appellate.pdf; Order Amending Appellate Rules, No. 94S00-0809-MS (Ind. Sept. 9, 2008), 

2. See Order Amending Indiana Rules of Trial Procedure and Indiana Rules of Appellate 
Procedure, No. 94S00-0801-MS-15 (Ind. Jan. 6, 2009), available «r 
orders/rule-amendments/2009/0 1 09-trproapppro.pdf. 

3 . See Order Amending Indiana Administrative Rules, No. 94S00-08 1 0-MS- 1 5 (Ind. Oct. 
6, 2008), available at 1 008-admin.pdf. 

814 INDIANA LAW REVIEW [Vol. 42:813 

A. Appellate Rule 23 — The Rotunda Filing Drop Box 

The supreme court amended Appellate Rule 23 to include the location of the 
rotunda filing drop box in the State House. Specifically, amended Appellate 
Rule 23(A)(1) provides: 

All papers will be deemed filed with the Clerk when they are: (1) 
personally delivered to the Clerk (which, when the Clerk's office is open 
for business, shall mean personally tendering the papers to the Clerk or 
the Clerk's designee; and at all other times (unless the Clerk specifies 
otherwise) shall mean properly depositing the papers into the "rotunda 
filing drop box" located in the vestibule of the east second-floor entrance 
to the State House). "^ 

B. Cases Involving Records Excluded from Public Access 

The majority of the supreme court's amendments to the Appellate Rules 
affect the requirements for cases involving records excluded from public access. 
The supreme court amended Appellate Rule 9, which governs the initiation of an 
appeal.^ Amended Appellate Rule 9(J) directs parties to file documents and 
information excluded from public access in accordance with Indiana Trial Rule 
5(G) and Administrative Rule 9(G)(4).^ 

The supreme court also amended Appellate Rule 15, which outlines the 
requirements for an appellant's case summary.^ Pursuant to amended Appellate 
Rule 15, an appellant must set forth in its appellant's case summary "[w]hether 
or not all, or any portion, or none of the court records were sealed or excluded 
from public access by court order."^ The party must also certify that it "has 
reviewed and complied, and will continue to comply, with the requirements of 
Indiana Administrative Rule 9(G)(4) to the extent it applies to the appeal."^ 
Moreover, the party must attach "[a] copy of all trial court entries relating to the 
sealing of any court records excluded from public access." ^^ The supreme court 
also amended the designated form for the appellant's case summary to add areas 
for the appellant to include this information.'^ 

4. IND. Apr R. 23(A). 

5 . Order Amending Indiana Rules of Appellate Procedure, No. 94S00-08 1 0-MS- 15, supra 
note 1. 

6. Ind. App. R. 9(J). Administrative Rule 9(G)(4) is a new provision governing access to 
court records in appellate proceedings and will be discussed momentarily. See infra notes 11-17 
and accompanying text. 

7. Order Amending Indiana Rules of Appellate Procedure, No. 94S00-08 lO-MS-15, supra 
note 1. 

8. Ind.App.R. 15(C)(2)(k). 

9. Ind.App.R. 15(C)(4)(i). 

10. Ind.App.R. 15(D)(7). 

1 1 . Order Amending Indiana Rules of Appellate Procedure, No. 94S00-08 10-MS- 15, supra 
note 1 (amending iND. Form. App. 15-1). 


Additionally, the supreme court added Appellate Rule 53(H), which governs 
the procedures for oral arguments in cases with sealed records. ^^ Appellate Rule 
53(H) provides that *'[i]n any appeal in which case records are deemed 
confidential or excluded from public access, the parties and their counsel shall 
conduct oral argument in a manner reasonably calculated to provide anonymity 
and privacy in accordance with the requirements of Administrative Rule 

Many of the amended Appellate Rules reference Administrative Rule 
9(G)(4). The supreme court added*"^ this provision to the Administrative Rules 
to place certain obligations on parties in appellate proceedings regarding access 
to court records. Specifically, Administrative Rule 9(G)(4) provides: 

(4) Appellate Proceedings. In appellate proceedings, parties, counsel, 
the courts on appeal, and the Clerk of the Supreme Court, Court of 
Appeals, and Tax Court ("Clerk") shall have the following obligations. 

(a) Cases in which the entire record is excluded from public access by 
statute or by rule. In any case in which all case records are excluded 
from public access by statute or by rule of the Supreme Court, 

(i) the Clerk shall make the appellate chronological case 
summary for the case publicly accessible but shall identify the 
names of the parties and affected persons in a manner 
reasonably calculated to provide anonymity and privacy; [^^] and 

(ii) the parties and counsel, at any oral argument and in any 
public hearing conducted in the appeal, shall refer to the case 
and parties only as identified in the appellate chronological case 
summary and shall not disclose any matter excluded from public 

(b) Cases in which a portion of the record is excluded from public access 
by statute or by rule. In any case in which a portion (but less than all) 
of the record in the case has been excluded from public access by statute 
or by rule of the Supreme Court, 

(i) the parties and counsel shall not disclose any matter excluded 
from public access in any document not itself excluded from 

12. Id. (adding IND. App. R. 53(H)). 

13. iND. App. R. 53(H). 

14. Order Amending Indiana Administrative Rules, No. 94S00-08 lO-MS-15, supra note 3. 

15. This portion of the Rule was likely added in response to the Clerk of the Court's 
interpretation of Administrative Rule 9(G)(l)(b)(i), which was cited as support for the decision to 
remove the entire online appellate docket for certain appeals involving juveniles. See Posting of 
Marcia Oddi to Indiana Law Blog, (Oct. 8, 2008, 19:34 EST). 

816 INDIANA LAW REVIEW [Vol. 42:813 

public access; to the extent it is necessary to refer to excluded 
information in briefs or other documents that are not excluded 
from public access, the reference shall be made in a separate 
document filed in compliance with Trial Rule 5(G); and 

(ii) the parties, counsel, and the Clerk shall have the respective 
obligations set forth in (a)(i) and (a)(ii) to the extent necessary 
to comply with the statute or rule. 

(c) Cases in which any public access is excluded by trial court order. In 
any case in which all or any portion of the record in the case has been 
excluded from public access by trial court order ("TCO"), 

(i) (A) the appellant shall provide notice in the appropriate place 
on the appellant's case summary (see Ind. Appellate Rule 15) 
that all or a portion of the record in the case has been excluded 
from public access by TCO, and attach to the appellant's case 
summary all TCOs concerning each exclusion; and 

(B) the parties, counsel, and the Clerk shall have the 
respective obligations set forth in (a)(i), (a)(ii), and 
(b)(i) to the extent necessary to comply with the TCO. 

(ii) if the notice and supporting orders referred to in (i)(A) are 
supplied, then the Clerk shall exclude the information from 
public access to the extent necessary to comply with the TCO 
unless the court on appeal determines that 

(A) the TCO was improper or is no longer appropriate, 

(B) public disclosure of the information is essential to 
the resolution of litigation, or 

(C) disclosure is appropriate to further the 
establishment of precedent or the development of the 

(iii) any party may supplement or challenge the appellant's 
notice or attachments supplied under (i)(A) or request a 
determination from the court on appeal under (ii); and 

(iv) if the appellant does not notify the court on appeal that all 
or a portion of the record in the case has been excluded from 
public access by TCO, and attach to the appellant's case 
summary all TCOs concerning each exclusion, as required by 


(A) the Clerk shall be under no obligation to exclude 
the information from public access; and 

(B) the appellant and appellant's counsel shall be 
subject to sanctions. 

(d) Orders, decisions, and opinions issued by the court on appeal shall 
be publicly accessible, but each court on appeal should endeavor to 
exclude the names of the parties and affected persons, and any other 
matters excluded from public access, except as essential to the resolution 
of litigation or appropriate to further the establishment of precedent or 
the development of the law.^^ 

The supreme court's extensive amendments to the Appellate and 
Administrative Rules for cases involving records excluded from public access 
demonstrate the court's commitment to delineating a procedure for cases of this 
nature. Additionally, the intricacies of the amendments make one thing clear: 
Appellate practitioners representing parties in cases with records excluded from 
public access must be careful to comply with the rules or risk being subject to 

C. Appellate Rule 14.1 — Juvenile ''Rocket Docket'' 

Effective January 1, 2009, the supreme court issued an order adding 
Appellate Rule 14. 1 , which estabhshes an expedited appellate review process for 
certain cases involving appeals from juvenile proceedings.^^ Specifically, 
Appellate Rule 14.1 applies to appeals authorized by Indiana Code sections 31- 
34-4_7(f), 3 1-34- 19-6. 1(f), 31-37-5-8(g), and 31-37-18-9(d), which deal with 
determinations regarding Children in Need of Services (CHE^JS) and juvenile 
delinquency.^^ In these cases, the Department of Child Services (DCS) must file 
a notice of expedited appeal with the trial court clerk within five business days 
of the trial court's order of placement or services.^^ The supreme court added 
Form 14. 1-1 for this purpose.^^ Any party who receives the notice of expedited 
appeal shall have five business days from service to file an appearance.^^ Failure 
to do so removes that party from the appeal. ^^ 

Appellate Rule 14.1(C) provides that the "completion of the Transcript and 

16. IND. Admin. R. 9(G)(4). 

17. See iND. Admin. R. 9(G)(4)(c)(iv)(B). 

18. Order Amending Indiana Rules of Trial Procedure and Indiana Rules of Appellate 
Procedure, No. 94S00-0801-MS-15, supra note 2. 

19. Ind.App.R. 14.1(A). 

20. Ind.App.R. 14.1(B)(1). 

21. Order Amending Indiana Rules of Trial Procedure and Indiana Rules of Appellate 
Procedure, No. 94S00-0801-MS-15, supra note 2 (adding iND. FORM App. 14.1-1). 

22. Ind.App.R. 14.1(B)(5). 

23. Id. 

8 1 8 INDIANA LAW REVIEW [Vol. 42: 8 1 3 

the Record on Appeal shall take priority over all other appeal transcripts and 
records. "^"^ Consequently, the assembly of the clerk's record shall be completed 
and the transcript filed within ten business days after the filing of the notice of 
appeal.^^ On the eleventh business day following the filing of the transcript, the 
trial court clerk shall transmit the transcript, and failure to meet this deadline 
shall require the trial court clerk to show case to the court of appeals why he or 
she should not be held in contempt. ^^ 

Appellate Rule 14.1(D) provides that any party may file a memorandum in 
narrative form and exempts the memorandum from various formatting 
requirements found in other appellate rules. ^^ Memoranda shall not exceed ten 
pages.^^ DCS shall have five business days from the filing of the notice of 
completion of transcript to file a memorandum stating why the trial court's 
decision should be reversed, and any responding party shall have five business 
days after DCS has filed its memorandum to file a responsive memorandum.^^ 
No reply memorandum^^ or extension of time is allowed.^ ^ Additionally, a party 
may not seek rehearing of an appellate decision.^^ A petition to transfer to the 
supreme court must be filed within five business days after the adverse decision 
of the court of appeals, and the petition "shall not exceed one (1) page in 

Appellate Rule 14.1 will certainly expedite the appellate process for the 
applicable juvenile cases. However, it will be interesting to find out how 
attorneys handling these cases adapt to its strict deadlines with no possibility for 
extensions of time. 

n. Case Law Interpreting the Appellate Rules 

The vast majority of case law applying the Appellate Rules is handed down 
by the court of appeals. While the supreme court occasionally has an opportunity 
to interpret the Appellate Rules, the sheer number of cases the court of appeals 
tackles each year gives it more chances to construe the Appellate Rules. 

A. The Appellate Rules Trump 

The court of appeals issued two opinions this year reconciling conflicts 
between the Appellate Rules and either the Trial Rules or a statute. In both 
cases, the court of appeals concluded that the Appellate Rules trumped the 

24. Ind.Apr.R. 14.1(C)(1). 

25. Id. 

26. IND. Apr R. 14.1(C)(3). 

27. Ind.App.R. 14.1(D)(1). 

28. Ind.App.R. 14.1(D)(2). 

29. Ind.App.R. 14.1(D)(3). 

30. Ind.App.R. 14.1(D)(5). 

31. Ind.App.R. 14.1(E). 

32. Ind.App.R. 14.1(F). 

33. Ind.App.R. 14.1(H). 


conflicting provision. 

In Marlett v. State, ^"^ the State argued on cross-appeal that Marlett's notice 
of appeal was untimely and, thus, his appeal should be dismissed.^^ The trial 
court sentenced Marlett for his criminal conviction on December 1, 2006.^^ 
Therefore, Marlett's notice of appeal was due to be filed on or before January 2, 
2007.^^ Although Marlett had documentation that he mailed his notice of appeal 
to the trial court on December 29, 2006, it was not sent by registered, certified, 
or express mail, and the trial court did not receive the notice of appeal until 
January 3, 2007.^^ 

In addressing the State's cross-appeal, the court of appeals noted that Trial 
Rule 5(F)(3) requires that in order for a filing by mail to be deemed to have 
occurred on the date of mailing, the mail must be sent by registered, certified, or 
express mail.^^ By contrast, however. Appellate Rule 23(A)(2) provides, '"All 
papers will be deemed filed with the Clerk when they are . . . deposited in the 
United States Mail, postage prepaid, properly addressed to the Clerk . . . .""^^ 
Consequently, the court of appeals noted that Marlett's notice of appeal was 
timely pursuant to the Appellate Rules because the filing date would be 
December 29, 2006, but that his notice was untimely pursuant to the Trial Rules 
because it was not sent by registered, certified, or express mail and, thus, was not 
filed until January 3, 2007. 

The court of appeals held that "for purposes of determining the timeliness of 
a filing required by the Appellate Rules, the filing provisions of those rules trump 
those of the Trial Rules.'"*' Although the court acknowledged that "the Clerk" 
referred to in Appellate Rule 23(A) included the Clerk of the Supreme Court, 
court of appeals, and Tax Court but not the trial court clerk, the court held that 
*'[n]onetheless, in crafting the Appellate Rules a conscious decision was made 
that filings made by any type of United States Mail service would be deemed 
filed on the date of mailing, so long as postage was paid and it was addressed 
correctly .'"^^ Because the notice of appeal is a requirement of appellate practice 
and not trial practice, the court concluded that "[a]pplying Appellate Rule 
23(A)(2) in this case would not undermine the goals of strictly enforcing time 
limits for notice of appeals, among which are to ensure the expeditious 
processing of appeals and to ensure the finality of judgments. '"^^ Therefore, the 

34. 878 N.E.2d 860 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 43 (Ind. 2008). 

35. /J. at 863-64. 

36. /J. at 863. 

37. Id. at 864 (citing Ind. App. R. 25(A)-(B)). Although the thirtieth day after Marlett's 
sentence fell on December 3 1 , 2006, both it and the following day were non-business days. Thus, 
Marlett's notice of appeal was not due until January 2, 2007. 

38. Id. 

39. Id. (citing iND. TRIAL R. 5(F)(3)). 

40. Id. (quoting iND. APP. R. 23(A)(2)). 

41. Id. 

42. Id. 

43. Id. 

820 INDIANA LAW REVIEW [Vol. 42:813 

court of appeals held that Marlett's notice of appeal was timely and declined to 
dismiss his appeal.'^'^ 

In Crist v. South-West Lake Maxinkuckee Conservancy District, ^^ the court 
of appeals reconciled a conflict between the Appellate Rules and Indiana Code 
section 14-33-2-28, regarding whether the court of appeals or the supreme court 
had jurisdiction over a direct appeal from a trial court order establishing a 
conservancy district/^ Indiana Code section 14-33-2-28 provides that an order 
establishing a conservancy district "may be appealed to the supreme court within 
thirty (30) days.'"^^ However, the court of appeals noted that Appellate Rule 4 
grants the supreme court both mandatory and discretionary jurisdiction, but "[a]n 
appellant seeking to have the Supreme Court exercise discretionary jurisdiction 
over a direct appeal pursuant to [Appellate] Rule 4(A)(2) must file a motion with 
our Supreme Court pursuant to Appellate Rule 56.""^^ Additionally, the court 
noted that "Appellate Rule 5 provides that '[e]xcept as provided in Rule 4, the 
Court of Appeals shall have jurisdiction in all appeals from Final Judgments of 
Circuit, Superior, Probate, and County Courts, notwithstanding any law, statute 
or rule providing for appeal directly to the Supreme Court of Indiana y^'^ 

The court of appeals emphasized that the case "[did] not qualify for 
mandatory supreme court review pursuant to Appellate Rule 4(A)(1)."^^ 
Moreover, the court noted that the trial court' s order establishing the conservancy 
district was a final judgment but the appellant did not file a motion seeking 
discretionary review with the supreme court pursuant to Appellate Rule 56.^^ 
Therefore, the court held that "[wjhile we agree that Indiana Code section 14-33- 
2-28 clearly states that an appellant can appeal the trial court's order establishing 
a conservancy district directly to our Supreme Court, Rule 5(A) trumps that 
statute and gives our court jurisdiction."^^ As support for its holding, the court 
of appeals cited Indiana Code section 34-8-1-3, which provides that rules adopted 
by the supreme court ultimately control, and "all laws in conflict with the 
supreme court' s rules have no further force or effect."^^ Consequently, the court 
of appeals concluded that it had jurisdiction over the direct appeal pursuant to 
Appellate Rule 5(A) and addressed the merits of the case. 

B. The Effect of Trial Rule 533 's ''Deemed Denied'' Provision on Appeal 
Trial Rule 53.3 provides that if a trial court does not set a hearing on a 

44. Id. 

45. 875 N.E.2d 222 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 40 (Ind. 2008). 

46. Id. at 227. 

47. Id. (quoting iND. CODE § 14-33-2-28 (2004)). 

48. Id. 

49. Id. (quoting iND. APP. R. 5). 

50. Id. 

51. Id. 

52. Id. 

53. /J. (citing Ind. Code §34-7-1-3). 


motion to correct error within forty-five days of the motion or fails to rule on a 
motion to correct error within thirty days after the hearing (or forty-five days 
after it was filed if no hearing is required), the pending motion "shall be deemed 
denied [and a]ny appeal shall be initiated by filing the notice of appeal under 
Appellate Rule 9(A) within thirty (30) days after the Motion to Correct Error is 
deemed denied."^"^ During the reporting term, the supreme court and the court of 
appeals had three opportunities to construe and apply the effect of the Rule 53.3 
"deemed denied" provision on pending appeals. 

In HomEq Servicing Corp. v. Baker, ^^ the defendants' motion to correct error 
was deemed denied pursuant to Trial Rule 53.3 because the trial court did not 
rule on it within thirty days of the hearing.^^ However, the trial court attempted 
to belatedly grant the defendants' motion to correct error eight days after the 
deadline had passed.^^ Plaintiff appealed the trial court's attempt to grant the 
motion and argued that it had already been deemed denied. The defendants 
cross-appealed, asserting error in the denial of their motion.^^ 

To resolve the parties' dispute, the supreme court emphasized a footnote 
from a previous opinion,^^ Cavinder Elevators, Inc. v. Hall:^^ 

If the trial court belatedly grants a motion to correct error before the 
party filing the motion to correct error initiates an appeal but during the 
time period within which such party is entitled to appeal from the 
deemed denial, the party may assert as cross-error the issues presented 
in its "deemed denied" motion to correct error. ^^ 

The Homeq court reasoned that "[t]his exception recognizes the probable 
correctness of a trial court's decision modifying its own previous ruling and 
permits the proponent of the belatedly-granted motion to delay initiating a 
possibly unnecessary appeal until ascertaining whether the opponent of the 
motion chooses to acquiesce in the belated ruling. "^^ In other words, the 
exception outlined in Cavinder Elevators "permit[s] the defendants to initially 
forego commencing an appeal to see if the plaintiff would agree with the merits 
of the trial court's belated ruling and choose not to assert its invalidity on 
grounds of tardiness."^^ However, if the opponent of the motion appeals the trial 
court's belated grant of the motion, the proponent of the motion is entitled to 
proceed by cross-appeal to obtain appellate review of the merits of the issues 

54. IND. Trial R. 53.3(A). 

55. 883 N.E.2d 95 (Ind. 2008). 

56. Id. at 96-97. 

57. Mat 96. 

58. Id. 2X96-91. 

59. Id. 2X91. 

60. 726 N.E.2d 285, 289 n.4 (Ind. 2000). 

61. HomEq, 883 N.E.2d at 97 (quoting Cavinder, 726 N.E.2d at 289 n.4). 

62. Id. 

63. Id. 

822 INDIANA LAW REVIEW [Vol. 42: 8 1 3 

raised in the motion.^"^ 

In Paulsen v. Malone,^^ the plaintiff filed a motion to correct error after the 
trial court entered a defense verdict.^^ The trial court held a hearing on the 
motion and, after the hearing, made an entry on the Chronological Case Summary 
that the plaintiff would submit additional authority for the trial court's 
consideration.^'^ Although the plaintiff ultimately filed supplemental authority 
and the defendant filed a response, the trial court did not grant the plaintiffs 
motion to correct error until sixteen days after it had been deemed denied by 
Trial Rule 53.3.'' 

The defendant appealed the trial court's belated grant of the motion, arguing 
that the plaintiffs motion had been deemed denied pursuant to Trial Rule 53.3.'^ 
Although the plaintiff did not dispute the language of the rule, she argued that the 
thirty-day time period did not begin to run until the additional authority and 
response had been submitted to the trial court.^^ In other words, the plaintiff 
claimed that the trial court had essentially kept the hearing record open by 
allowing the submission of additional authority, stopping the Trial Rule 53.3 
clock. ^^ The court of appeals disagreed, citing the specific language of the rule 
and concluding that 

[t]he plain language of this rule states that the allotted time period to rule 
on the motion begins to run at the conclusion of the hearing itself, and 
not at some later date. Nothing in the language of this rule suggests that 
the matter is still being '*heard" after the hearing terminates and while 
supplemental authority is being offered.^^ 

Additionally, the court noted that pursuant to Trial Rule 53.3(D), "the trial court 
was capable of granting itself an additional thirty days to rule, if, after reviewing 
the parties' post-hearing submissions, the trial court deemed such an extension 
was necessary."^^ Because the trial court did not do so and failed to rule on the 
motion to correct error within the confines of Trial Rule 53.3, the court of 
appeals held that the motion was deemed denied thirty days after the hearing and, 
consequently, the ''trial court lost its power to rule on the motion to correct 

In Johnson v. Johnson,^^ the court of appeals addressed the effect of Trial 

64. Id. 

65. 880 N.E.2d 312 (Ind. Ct. App. 2008). 

66. /J. at 313. 

67. Id. 

68. Id. 

69. Id. 

70. /J. at 314. 

71. Id. 

72. /J. at 314-15. 

73. /^. at 315. 

74. Id. 

75. 882 N.E.2d 223 (Ind. Ct. App. 2008). 


Rule 53.3 on a trial court's nunc pro tunc order granting a motion to correct 
error 7^ In Johnson, the petitioner filed a motion to correct error regarding the 
trial court's dissolution decree^^ A magistrate judge presided over the hearing 
on the motion and informed the parties at the end of the hearing that she was 
going to grant the petitioner' s motion/^ However, the trial court did not enter an 
order granting the motion until seventy-nine days after the hearing, when it 
issued a nunc pro tunc order amending the dissolution decree in favor of the 
petitioner; accordingly, the respondent appealed^^ 

Before addressing the effect of Trial Rule 53.3 on the motion to correct error, 
the court of appeals held that although the magistrate conveyed her intent to grant 
the motion at the end of the hearing, she "did not have the authority to actually 
grant [the] motion or enter a final appealable order [pursuant to hidiana Code 
sections 33-23-5-8 and 33-23-5-9]."^^ Turning to the trial court's nunc pro tunc 
order entered seventy-nine days after the hearing, the court of appeals noted that 
the trial court had not extended the ruling deadline pursuant to Trial Rule 53.3(D) 
and followed the Paulsen court' s holding that "the thirty-day 'time period to rule 
on the motion begins to run at the conclusion of the hearing itself, not at some 
later date.'"^^ Because there was no evidence that the trial court granted the 
motion within thirty days of the hearing, the court of appeals concluded that the 
trial court could not issue a nunc pro tunc order seventy-nine days after the 
hearing.^^ The court of appeals acknowledged that "the facts of this case require 
us to choose between the lesser of two evils[, . . . and because Trial] Rule 53.3 
may create numerous potholes into which a litigant can stumble, the burden 
should be on the party seeking to correct the trial court' s alleged error to preserve 
its claims. "^^ 

C. Appellate Attorney Fees 

1. Applying Appellate Rule 66(E). — Appellate Rule 66(E) provides that 
"[t]he Court may assess damages if an appeal, petition, or motion, or response, 
is frivolous or in bad faith. Damages shall be in the Court's discretion and may 

76. Id. at 225. 

77. Id. 

78. Id. 

79. Id. 

80. Id. at 226. 

81. Id. at 227 (quoting Paulsen v. Malone, 880 N.E.2d 312, 314 (Ind. Ct. App. 2008)). 

82. Id. at 227-28. 

83. Id. at 229. Judge Darden authored a dissenting opinion arguing that he "would not find 
Trial Rule 53.3 to have a dispositive effect here . . . [because] the parties understood that the trial 
court had granted [the petitioner's] motion." Id. at 229-30 (Darden, J., dissenting). The majority 
responded by noting that "[v^]hile we sympathize with the dissent's penchant for equity, we cannot 
disregard the magistrate's lack of authority to issue a final ruling and, thus, must conclude that the 
trial court abused its discretion by issuing an untimely nunc pro tunc order." Id. at 229 n.3. 

824 INDIANA LAW REVIEW [Vol. 42:813 

include attorneys' fees. The Court shall remand the case for execution. "^"^ 
During the reporting term, the court of appeals had numerous opportunities to 
deny parties' requests for appellate attorney fees.^^ However, it chose to award 
fees in some cases.^^ 

In Lesjak v. New England FinanciaU^^ the court of appeals noted that 
appellate attorney fees are typically awarded for either substantive or procedural 
bad faith.^^ "Substantive bad faith 'implies the conscious doing of a wrong 
because of dishonest purpose or moral obliquity. '"^^ "Procedural bad faith is 
present 'when a party flagrantly disregards the form and content requirements of 
the Rules of Appellate Procedure, [and] omits and misstates relevant facts 

appearing in the record '"^^ The court of appeals found the substance of the 

appeal to be moot because, although the appellee had represented to the trial 
court that it could not engage in arbitration because the claim was not arbitrable, 
the parties began arbitration during the pendency of the appeal.^^ After analyzing 
the appellees' conduct before the trial court and court of appeals, the court 

We have little trouble concluding that [the appellee] has engaged in both 
procedural and substantive bad faith during this appeal, if not the entire 
litigation. After fighting arbitration for months and informing the trial 
court that, in fact, arbitration . . . was impossible, [the appellee] 
dramatically reversed course and simply initiated the arbitration on the 
eve of the due date of its appellee's brief. Although it likely hoped that 
it would not have to incur the financial and temporal expense of drafting 
an appellate brief, [the appellee] was ordered to do so by this court. 
When, however, the final due date arrived, [the appellee] defied this 
court' s order and filed a motion for extension of time rather than a brief, 
which arrived a week later. And in the end, after [the appellant] has 
incurred over $ 1 9,000 in attorney fees seeking to compel arbitration[, the 
appellee] adds a final insult to injury by suggesting that [the appellant] 
should be grateful for this outcome.^^ 

84. IND. Apr R. 66(E). 

85. See Rovai v. Rovai, 891 N.E.2d 177, 181 n.4 (Ind. Ct. App. 2008), trans, granted, 
N.E.2d 1231 (Ind. 2008); Pardue v. Smith, 875 N.E.2d 285, 292 (Ind. Ct. App. 2007); Pramco III, 
LLC V. Yoder, 874 N.E.2d 1006, 1014-15 (Ind. Ct. App. 2007); Wholesalers, Inc. v. Hobson, 874 
N.E.2d 622, 627 (Ind. Ct. App. 2007). 

86. See infra notes 87-1 16 and accompanying text. 

87. 879 N.E.2d 1 129 (Ind. Ct. App. 2008). 

88. /^. at 1132-35. 

89. Id. at 1 133 (quoting Wallace v. Rosen, 765 N.E.2d 192, 201 (Ind. Ct. App. 2002)). 

90. Id. (quoting Wallace, 765 N.E.2d at 201). 

91. /J. at 1134-35. 

92. Id. at 1 134. Additionally, the court of appeals opined that 

[w]hether [the appellant] is entitled to attorney fees for [the appellee's] conduct prior 
to this appeal is not, we think, a close call. But it is a call more appropriately made by 


Consequently, the court of appeals awarded the appellant appellate attorney fees 
pursuant to Appellate Rule 66(E). 

In Knowledge A-Z, Inc. v. Sentry Insurance, ^^ the court of appeals noted that 
its discretion for awarding appellate attorney fees "is limited to instances 'when 
an appeal is permeated with meritlessness, bad faith, frivolity, harassment, 
vexatiousness, or purpose of delay. '"^"^ The court noted that as a general matter, 
it is cautious to award appellate attorney fees "because of the potentially chilling 
effect the award may have upon the exercise of the right to appeal. "^^ However, 
the court of appeals concluded that the appellant "has litigated this matter to an 
unreasonable extreme [and, u]nremitting to logic or sensibility, [the appellant] 
and its attorney trudge on."^^ Consequently, the court of appeals ordered the 
appellant to compensate the appellee for attorney fees it incurred defending the 

2. Trial Rule 65(C). — In Bigley v. MSD of Wayne Township Schools, ^^ 
taxpayers sued a local school board, challenging the competitive bidding process 
it utilized to build a swimming pool.^^ The trial court granted a temporary 
restraining order (TRO) to the taxpayers and ordered them to post security .^^ 
However, a few days later, the trial court sua sponte vacated the TRO because the 
taxpayers' motion failed to comply with Trial Rule 65(B)(2). ^^^ The trial court 
held a hearing and ultimately denied the taxpayers' motion for preliminary 
injunction, dissolving the TRO. The taxpayers appealed, and the court of appeals 
affirmed the trial court's decision. '^^ 

On remand, the school board filed a motion for the attorney fees it incurred 
defending the taxpayers' preliminary injunction motion to the trial court. ^^^ The 
trial court concluded that the school board was entitled to some of the attorney 
fees it requested, and the taxpayers appealed. After analyzing the trial court's 
decision to award certain attorney fees but deny others, the court of appeals 
turned to the school board's request to recover the appellate attorney fees that it 
incurred defending the award. The court of appeals noted that "[n]either party 
cites, nor does our own research reveal, any Indiana cases in which the recovery 

the trial court or, if the trial court sees fit to direct the arbitrator to consider the issue, 
the arbitrator. 


93. 891 N.E.2d 581 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1230 (Ind. 2008). 

94. Id. at 586 (quoting Boczar v. Meridian St. Found., 749 N.E.2d 87, 95 (Ind. Ct. App. 

95. Id. 

96. Id. 

97. 881 N.E.2d 77 (Ind. Ct. App. 2008). 

98. Id. at 79. 

99. Id. 

100. Id. at 80. 

101. Id. 

102. Id. at 80-81. 

826 INDIANA LAW REVffiW [Vol. 42:813 

of attorney's fees incurred in defending an appeal of a Trial Rule 65(C) award 
of attorney's fees was examined."^^^ However, the court noted that the rule 
"prohibits the trial court from issuing a restraining order or preliminary 
injunction 'except upon the giving of security by the applicant. "'^^'* Additionally, 
Trial Rule 65(C) permits a "party who is found to have been wrongfully enjoined 
or restrained" to recover costs and damages it incurred. ^^^ Therefore, the Bigley 
court concluded that the school board was entitled to recover attorney fees it 
incurred defending the trial court's award on appeal because "[r]equiring the 
Board to absorb any fees or costs incurred in protecting the awarded fees would 
not fully compensate the Board for defending against the TRO."^^^ As a result, 
the court of appeals remanded to the trial court for a hearing to determine the 
attorney fees the school board sustained defending the taxpayers' appeal granting 
the school board's attorney fees. 

3. "Additional Items As Permitted By Law" in Appellate Rule 67. — In 
Natare Corp. v. Cardinal Accounts, Inc.,^^^ a. party that had prevailed in a 
previous appeal^^^ filed a motion seeking costs for that appeal pursuant to 
Appellate Rule 67, which provides, in relevant part: 

(B) Components. Costs shall include: 

(1) the filing fee, including any fee paid to seek transfer or 

(2) the cost of preparing the Record on Appeal, including the 
Transcript, and appendices; and 

(3) postage expenses for service of all documents filed with the 

The Court, in its discretion, may include additional items as permitted 
by law. Each party shall bear the cost of preparing its own briefs. 

(C) Party Entitled to Costs .... When a judgment has been reversed in 
whole, the appellant shall recover costs in the Court on Appeal and in 
the trial court or Administrative agency as provided by law. . . .^^^ 

The party that lost the previous appeal did not challenge the award of costs 
such as the filing fee, transcript preparation, appendix production, or postage, so 
the court of appeals granted the prevailing party's motion regarding those fees.^^° 
However, the prevailing party also observed that Appellate Rule 67 grants the 

103. Id.atM. 

104. Id. at 85 (quoting IND. TRIAL R. 65(C)). 

105. iND. Trial R. 65(C). 

106. Bigley, 881 N.E.2d at 86. 

107. 878 N.E.2d 1290 (Ind. Ct. App. 2008). 

108. See Natare Corp. v. Cardinal Accounts, Inc., 874 N.E.2d 1055 (Ind. Ct. App. 2007). 

109. Ind. App. R. 67(B)-(C). 

1 10. Natare, 878 N.E.2d at 1292. 


court of appeals discretion to award "additional items as permitted by law."^^^ 
Therefore, the prevailing party moved for appellate attorney fees for the previous 
appeal. ^ ^^ The Natare court noted that a previous panel had held that " 'additional 
items as permitted by law' does include attorney fees 'when an appeal is 
permeated with meritlessness, bad faith, frivolity, harassment, vexatiousness, or 
purpose of delay. '"^^^ The court noted that "[i]t is well established that in 
pursuing a lawsuit, attorneys are expected to 'determine expeditiously' the 
propriety of continuing the litigation and are expected to dismiss promptly claims 
that are found to be frivolous, unreasonable, or groundless."^ ^"^ If a party litigates 
a case past that point, "the litigation becomes frivolous and attorney fees for the 
other party 'from that point in the litigation at which pursuing the claim became 
frivolous' are warranted."^ '^ After analyzing the case's timeline of events, the 
court of appeals concluded that the prevailing party had been "forced to appeal 
the erroneous result of the frivolous litigation and should not have to bear the 
financial burden of its attorneys' services during the appellate process."^ ^^ 
Consequently, the court of appeals awarded the prevailing party its appellate 
attorney fees pursuant to the "additional items as permitted by law" language of 
Appellate Rule 67. 

D. Applying Appellate Rules to Arguments in Reply Briefs 

Generally, new arguments made in a reply brief are waived pursuant to 
Appellate Rule 46(C), which provides that "[n]o new issues shall be raised in the 
reply brief."' ^^ In Bums-Kish Funeral Homes, Inc. v. Kish Funeral Homes, 
LLC,^^^ the court of appeals noted that although there are four requirements for 
obtaining a preliminary injunction, the appellant had only discussed two of them 
in its opening brief. '^^ Consequently, although it elaborated on all four 
requirements in its reply brief, the court of appeals declined to address the new 
arguments raised on reply and only responded to the appellant's "two main 
arguments. "'^^ 

At least two cases issued by the court of appeals suggest that a party cannot 
waive an argument regarding the applicable standard of review. In Town of 

111. IND. Apr R. 67(B). 

1 12. Natare, 878 N.E.2d at 1292. 

113. Id. (quoting Commercial Coin Laundry Sys. v. Enneking, 766 N.E.2d 433, 442 (Ind. Ct. 
App. 2002)). 

1 14. Id. (quoting Kahn v. Cundiff, 543 N.E.2d 627, 629 (Ind. 1989)). 

115. Id. (quoting Kahn, 543 N.E.2d at 629). 

116. /6?. at 1292-93. 

1 17. Ind. App. R. 46(C); see also Hardley v. State, 893 N.E.2d 1 140, 1 145 n.5 (Ind. Ct. App. 
2008), ajf'd, 905 N.E.2d 399 (Ind. 2009); Cain v. Back, 889 N.E.2d 1253, 1259 n.6 (Ind. Ct. App.), 
trans, denied, 898 N.E.2d 1230 (Ind. 2008). 

118. 889 N.E.2d 15 (Ind. Ct. App. 2008). 

119. /J. at 22. 

120. Id. (citing iND. APP. R. 46(C)). 

828 INDIANA LAW REVIEW [Vol. 42:813 

Chandler v. Indiana- American Water Co.}^^ the appellant provided a standard 
of review in its opening brief but advocated for a more favorable standard of 
review in its reply brief. The appellee filed a motion to strike the new standard 
of review argument from the appellant's reply brief. ^^^ Initially, the court of 
appeals observed that Appellate Rule 46(C) provides that no new "issues" can be 
raised on reply and that the appellant was simply presenting a "new argument" 
but "the issue of standard of review was presented to this court ... in appellant's 
[opening] brief."^^^ Of note is the court's holding that 

the issue of the standard of review is always before us as an appellate 
court in every case. The parties need not present the standard of review 
as an issue before we may address it. To apply Appellate Rule 46(C) in 
the manner which [the appellee] urges would mean that this court could 
not apply the appropriate standard of review if a party misstated the 
standard of review in its briefs. The parties may choose their arguments, 
but they do not choose the standard of review applicable to their case.^^"^ 

Additionally, in Kendall v. State, ^^^ the court of appeals noted that the 
defendant had not cited the standard of review for his argument regarding the 
ineffectiveness of counsel and that "strict reading of our appellate rules would 
render this standard waived and the more deferential standard . . . would 
apply."^^^ However, the court of appeals ultimately addressed the defendant's 
argument "under the most defendant friendly standard used by our Supreme 

E. A Motion to Reconsider Does Not Extend Notice of Appeal Deadline 

In Fry v. State, ^^^ a criminal defendant filed a civil action against the 
Department of Correction (DOC) and, after Fry disregarded the discovery rules, 
the trial court granted the DOC's motion for judgment by default. Fry filed a 
motion for the trial court to reconsider its judgment, which the trial court later 
denied. Fry subsequently appealed. ^^^ 

The court of appeals agreed with the State's assertion that the trial court's 
order could be construed as an interlocutory order and not a final judgment 

121. 892 N.E.2d 1264 (Ind. Ct. App. 2008). 

122. Mat 1267-68. 

123. Id. 

124. Id. at 1268 (citing Dominiack Mech., Inc. v. Dunbar, 757 N.E.2d 186, 188 n.l (Ind. Ct. 
App. 2001)) ("[A]ppellee's failure to challenge issue upon appeal does not relieve [the court] of 
[its] obligation to correctly apply the law to the facts in the record."). 

125. 886 N.E.2d 48 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1219 (Ind. 2008). 

126. Id. at 53 n.3 (quoting iND. APP. R. 46(A)(8)(b)). 

127. Id. 

128. 893 N.E.2d 1089 (Ind. Ct. App. 2008), decision clarified on reh'g, 901 N.E.2d 83 (Ind. 
Ct. App. 2009). 

129. Id. at 1090-91. 


disposing of all claims. ^^^ Even assuming that the trial court's judgment was a 
final appealable order, the court of appeals noted that Trial Rule 53.4 "provides 
that a motion to reconsider does not 'delay the trial or any proceedings in the 
case, or extend the time for any further required or permitted action, motion, or 
proceedings under these rules. '"^^^ Additionally, the court observed that "it has 
long been held that the time for appeal is not extended by motions to 
reconsider." ^^^ Thus, although Appellate Rule 9 "provides that appeals from final 
judgments must be filed within thirty days after the entry . . . the motion to 
reconsider is not the same as a motion to correct error and does not work to 
extend the time period for filing the notice of appeal."^^^ Consequently, because 
Fry did not file his notice of appeal within thirty days of the final judgment and 
the motion to reconsider did not extend the deadline, the court of appeals 
dismissed the action as untimely without addressing the merits of Fry's appeal. ^^'^ 

F. Appellant Cannot Seek Rehearing from Denial of Motion to 
Accept Interlocutory Appeal 

In Merck & Co. v. Kantner,^^^ the motions panel of the court of appeals 
issued a published order denying a party's motion for the panel to reconsider the 
denial of a motion to accept an interlocutory appeal. ^^^ Appellate Rule 54(A) 
provides that "[a] party may seek Rehearing from the following: (1) a published 
opinion; (2) a not-for-publication memorandum decision; (3) an order dismissing 
an appeal; and (4) an order declining to authorize the filing of a successive 
petition for post-conviction relief. "^^^ The motions panel noted that 

[t]he denial of a Petition for Acceptance Of Interlocutory Appeal under 
Indiana Appellate Rule 14(B) is not an opinion, published or otherwise, 
or an order declining to authorize the filing of a successive petition for 
post-conviction relief. Furthermore, the denial of a request to accept a 
discretionary interlocutory appeal is not a dismissal, rather it is a 
decision that does not allow an appeal to begin. Because it is not one of 
the rulings that Indiana Appellate Rule 54 allows to be reheard by this 
Court, a Petition for Rehearing cannot be taken from the denial of a 
request to accept a discretionary interlocutory appeal under Indiana 
Appellate Rule 14(B). ^^^ 

Senior Judge George B. Hoffman, Jr. dissented from the motion panel's 

130. /J. at 1091. 

131. Id. at 1091-92 (citing IND. Trial R. 53.4(A)). 

132. Id. at 1092 (citing Strata v. Strate, 269 N.E.2d 568, 569 (Ind. Ct. App. 1971)). 

133. Id. 

134. Id. 

135. 883 N.E.2d 846 (Ind. Ct. App. 2008). 

136. Id. 

137. Ind. App. R. 54(A). 

138. Merest, 883 N.E.2d at 846. 

830 INDIANA LAW REVIEW [Vol. 42: 8 1 3 

decision, arguing that Trial Rule 14(B) "'cleariy states that the only prerequisite 
for this Court to accept a discretionary interlocutory appeal is certification of the 
order by the trial court. '"^^^ In support of his position, Judge Hoffman cited 
Bridgestone Americas Holding Inc. v. Mayberry (Bridgestone /), a case in which 
the court of appeals 's motions panel initially denied the appellant's petition to 
accept jurisdiction but subsequently reconsidered its decision and accepted 
jurisdiction after the appellant filed a motion to reconsider. ^"^^ The Bridgestone 
I court noted that Appellate Rule 54(A)(3) "permit[s] a petition for rehearing 
from 'an order dismissing an appeal '"^'^^ and 

[h]ere, the first motions panel's refusal to accept jurisdiction of 
Bridgestone' s discretionary interlocutory appeal is the functional 
equivalent of an order dismissing an appeal. That is, our refusal to 
accept jurisdiction has the same practical effect on litigants as an order 
dismissing an appeal. Thus, because Bridgestone petitioned for 
rehearing within 30 days of the first motions panel's order, and there is 
no evidence that the trial court had . . . reassumed jurisdiction, the 
second motions panel was not precluded from reconsidering and 
accepting jurisdiction of Bridgestone' s interlocutory appeal. ^"^^ 

Although the supreme court granted transfer on Bridgestone /, it explicitly 
"summarily affirm[ed] the Court of Appeals' treatmenf of the motion to 
reconsider the denial of the motion to accept the interlocutory appeal. ''^^ 
Therefore, in Merck, Judge Hoffman concluded that "[a]s our supreme court 
noted, the reasoning set forth in [Bridgestone /] is persuasive. I believe that we 
have jurisdiction to reconsider a motions panel's decision." ^"^"^ 

Merck sought transfer to the supreme court after the court of appeals denied 
rehearing. On June 5, 2008, the supreme court issued an order concluding that 
Merck's petition to transfer was improper^"^^ because Appellate Rule 57(B) 
expressly provides that "an order denying a motion for [a discretionary] 
interlocutory appeal . . . shall not be considered an adverse decision for the 
purpose of petitioning to transfer, regardless of whether rehearing by the Court 
of Appeals was sought."^"^^ Accordingly, the supreme court concluded Merck's 

139. Id. at 847 (Hoffman, J., dissenting) (quoting Bridgestone Ams. Holding, Inc. v. Mayberry, 
854 N.E.2d 355, 359 (Ind. Ct. App. 2006) (Bridgestone I), vacated on other grounds but issue 
summarily affirmed by Bridgestone Ams. Holding, Inc. v. Mayberry, 878 N.E.2d 189 (Ind. 2007) 
(Bridgestone IF)). 

140. Bridgestone /, 584 N.E.2d at 358. 

141. Id. at 360 (quoting iND. APP. R. 54(A)(3)). 

142. Id. 

143. Bridgestone Il%l^'^.E.2ddii\9\x\.2. 

144. Merck, 883 N.E.2d at 847. 

145. See Indiana Clerk of Courts Docket, 
(Cause No. 49A04-0712-CV-00706) (last visited June 14, 2009). Justice Frank Sullivan, Jr. voted 
to remand the case to the court of appeals for consideration of the rehearing petition. Id. 

146. Ind. App. R. 57(B)(4). 


petition to transfer was "procedurally improper" and ordered the petition and 
response to be returned to the parties. ^"^^ 

G. Judicial Notice of Independent Electronic Research 

The ease with which judges can conduct independent electronic research has 
led to the question of whether courts should be allowed to do so. Before turning 
to recent developments in this area, some background information is necessary. 
Indiana Evidence Rule 201(a) provides: 

A court may take judicial notice of a fact. A judicially-noticed fact must 
be one not subject to reasonable dispute in that it is either (1) generally 
known within the territorial jurisdiction of the trial court, or (2) capable 
of accurate and ready determination by resort to sources whose accuracy 
cannot reasonably be questioned. ^"^^ 

Additionally, the commentary to Canon 3B of the 2008 Indiana Code of Judicial 
Conduct ^"^^ advised that "[a] judge must not independently investigate facts in a 
case and must consider only the evidence presented." ^^^ These provisions have 
been construed as authorizing judicial notice of matters of common knowledge 
and matters that may not be common knowledge^^^ but are easily verified by 
unquestionably reliable sources. '^^ Additionally, the Indiana Practice treatise 
lists examples where courts have taken judicial notice of "verifiable facts," 
including geography, "the whereabouts of Indiana counties," the "distances 
between cities, . . . standard mortality tables," and election results. '^^ 

In Fisher v. State, ^^^ the court of appeals resolved as an issue of first 
impression whether an appellate court could take judicial notice in a post- 
conviction relief case of a record from the defendant's direct criminal appeal 
even though the trial court had affirmatively declined the opportunity to examine 
the record from the direct appeal. The court of appeals relied on Evidence Rule 

147. Id. 

148. IND.EVID.R. 201(a). 

149. The 2008 Code of Judicial Conduct has been superseded by the 2009 version. See infra 
notes 162-65 and accompanying text. 

150. A.B. V. State, 885 N.E.2d 1223, 1224 (Ind. 2008). 

151. See, e.g., Journal-Gazette Co., Inc. v. Bandido's, Inc., 712 N.E.2d 446, 460 n.20 (Ind. 
1999) (taking judicial notice of the fact that the words "rats" and "rodents" are frequently used 
interchangeably); Haley v. State, 736 N.E.2d 1250, 1253 (Ind. Ct. App. 2000) (affirming the trial 
court's decision to take judicial notice that a local institution was a school). 

152. See, e.g., Wright v. Spinks, 722 N.E.2d 1278, 1279 (Ind. Ct. App. 2000) (affirming the 
trial court's decision to take judicial notice of the word "mulligan" because it is defined in a 
dictionary and cases from other jurisdictions); Griffin v. Acker, 659 N.E.2d 659, 663 (Ind. Ct. App. 
1995) (concluding that it would have been proper for the trial court to take judicial notice of interest 
tables to determine present value of a damage award). 

153. 12 Robert L. Miller, Indiana Practice § 201 . 104 (2007). 

154. 878 N.E.2d 457 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 41 (Ind. 2008). 

832 INDIANA LAW REVIEW [Vol. 42:813 

201 and concluded that "based on the facts of this case, we may examine the 
record from Fisher' s direct appeal to the extent it contains factual information not 
subject to reasonable dispute."^^^ The Fisher court also made interesting 
observations regarding new technology and its potential effect on judicial notice: 

We take this opportunity to note that on December 17, 2007, 
Odyssey, a new computerized case management system, was 
implemented in Monroe county, pursuant to a project of our Supreme 
Court's Judicial Technology Automation Committee ("JTAC"). This 
system will allow courts to exchange and share information with other 
courts and state agencies, pursuant to JTAC 's belief that "it is in the best 
interest of Indiana's citizens, trial courts, court clerks, law enforcement 
officials, and lawyers that all of Indiana's courts maintain their records 
in a statewide computerized case management system that connects 
courts across county lines and connects courts with local and state 
entities that need court information." The implementation of this project 
demonstrates the growing trend of allowing trial courts to access and 
consider reliable information stored in court or other government 
records. We speculate that along with this access will undoubtedly come 
more permissive use of judicial notice, as it would be fairly unproductive 
to allow courts to access this information but not consider it. 

We also note that in 2000, our supreme court adopted family court 
rules for temporary use by trial courts participating in the Indiana 
Supreme Court Family Court Project. Pursuant to these rules, a family 
court "may take judicial notice of any relevant orders or Chronological 
Case Summary (CCS) entry issued by any Indiana Circuit, Superior, 
County, or Probate Court." Additionally, parties to a family court 
proceeding are permitted access to all cases within the proceeding, 
except that in the case of confidential records in a case to which they are 
not a party, parties must file a written petition identifying relevancy and 
need. These rules also demonstrate the increasing liberal allowance of 
judicial notice and use of court records in related proceedings. ^^^ 

In A.B. V. State, ^^^ the supreme court was presented with an issue of first 
impression regarding the propriety of criminal charges brought against a juvenile 
who posted "a vulgar tirade" about her school principal on the Internet site ^^^ As a preliminary matter, the supreme court noted that "the 
evidence presented at the fact-finding hearing was extremely sparse, uncertain, 
and equivocal regarding the operation and use of [MySpace], which is central to 
this case."^^^ After citing to the commentary of Canon 3B of the 2008 Indiana 

155. Mat 462. 

156. Id. at 462 n.2 (emphases added) (citations omitted). 

157. 885 N.E.2d 1223 (Ind. 2008). 

158. Mat 1225. 

159. Id. at 1224. 


Code of Judicial Conduct,^^^ the supreme court stated: "Notwithstanding this 
directive, in order to facilitate understanding of the facts and application of 
relevant legal principles, this opinion includes information regarding the 
operation and use of MySpace from identified sources outside the trial record of 
this case."^^^ The court subsequently explained how MySpace worked, citing 
various protocols and articles written about the site. 

On September 9, 2008, the supreme court issued a press release regarding the 
adoption of a new Code of Judicial Conduct, effective January 1, 2009.^^^ The 
2009 Code of Judicial Conduct is modeled after the 2007 American Bar 
Association Model Code of Judicial Conduct. ^^^ Rule 2.9(C) of the newly- 
adopted code provides that "[a] judge shall not investigate facts in a matter 
independently, and shall consider only the evidence presented and any facts that 
may properly be judicially noticed."^^"^ Although this language is similar to the 
language from Canon 3B of the 2008 Lidiana Code of Judicial Conduct, the 
commentary in the newly-adopted code explicitly provides that "[t]he prohibition 
against a judge investigating the facts in a matter extends to information available 
in all mediums, including electronic." ^^^ It certainly will be interesting to 
monitor how courts reconcile the accessibility of independent electronic research 
with the new judicial notice provisions in future decisions. 

m. Tips for Appellate Practitioners 

A. Failure to Comply with Appellate Rules May Result in Dismissal 

Li Galvan v. State,^^^ the court of appeals dismissed a criminal defendant's 
appeal "[d]ue to flagrant violations of the appellate rules." ^^^ The court noted 
that although it had previously warned Galvan' s attorney "on at least three 
occasions regarding his inadequate appellate advocacy . . . [he] has inexplicably 
chosen to ignore our advice. "^^^ Specifically, the court of appeals noted that the 
statement of facts did not comply with Appellate Rule 46(A)(6); the statement 
of the case did not comply with Appellate Rule 46(A)(5); the brief did not 
include a copy of the sentencing order as required by Appellate Rule 46(A)(10); 
the summary of the argument section merely copied the argument heading in 
violation of Appellate Rule 46(A)(7); the "paltry table of contents provided in the 
appendix has further hampered our review" in violation of Appellate Rule 50(C); 

160. See supra note 149 and accompanying text. 

161. A.B.,885N.E.2datl224. 

162. Press Release, Indiana Supreme Court, Indiana Supreme Court Adopts 2009 Judicial 
Code of Conduct (Sept. 8, 2008), available at 

163. Id. 

1 64. IND. Code of Judicial Conduct Rule 2.9(C) (2009). 

165. Id. cmt. 6. 

166. 877 N.E.2d 213 (Ind. Ct. App. 2007). 

167. Mat 215. 

168. Id. 

834 INDIANA LAW REVIEW [Vol. 42:813 

and the argument section was not supported by cogent reasoning as required by 
Appellate Rule 46(A)(8)(a). ^^^ "In light of the numerous and flagrant violations 
of [the] appellate rules," the court of appeals concluded that it "must dismiss 
[the] appeal."^'^ 

While the court of appeals had previously rejected appeals for 
noncompliance with the Appellate Rules, ^^^ the Galvan court took it further and 
ordered that Galvan' s attorney was "not entitled to a fee for his appellate services 
in this case, and we direct him to return to the payor any fee he may have already 
received." ^^^ The court also cautioned Galvan' s attorney that "future violations 
such as this may result in additional consequences, such as referral to the 
Supreme Court Disciplinary Commission for investigation, as Indiana 
Professional Conduct Rule 1.1 requires attorneys to represent their clients 
competently." ^^^ 

Of note is that the Galvan court chose to take away counsel's attorney fees 
before invoking the other consequences it had described in Keeney v. State .^^"^ 
In Keeney, the court of appeals admonished counsel for a brief that contained a 
gross amount of uncited material in violation of Appellate Rule 46(A)(8)(a). ^^^ 
Although the Keeney court chose to admonish counsel without further 
consequence, it noted that it could have taken away counsel's attorney fees, 
stricken the brief entirely, ordered counsel "to show cause ... [as to] why she 
should not be held in contempt," and referred the matter to the Supreme Court 
Disciplinary Commission for investigation. ^^^ 

B. Check the Online Docket 

During the reporting term, the court of appeals reminded counsel that the 
Clerk of Courts maintains an online docket for counsel to monitor their appellate 
cases. ^^^ A link to the online docket is available at 
cofc/. The court of appeals noted that counsel can use the online docket to 

169. /J. at 215-16. 

170. Id. at 216. 

171. See, e.g., Ramsey v. Review Bd. of Ind. Dep't of Workforce Dev., 789 N.E.2d 486, 490 
(Ind. Ct. App. 2003); Smith v. State, 610 N.E.2d 265, 267 n.2 (Ind. Ct. App. 1993). 

172. G^/van, 877 N.E.2d at 217. 

173. Id. 

174. 873 N.E.2d 187 (Ind. Ct. App. 2007). Keeney was profiled in last year's appellate 
procedure survey. Bryan H. Babb & Stephen A. Starks, Developments in Indiana Appellate 
Procedure: Appellate Rule Amendments, Remarkable Case Law, and Refining Our Indiana 
Practice, 41 iND. L. Rev. 853, 877-79 (2008). 

175. /i:^^^^);, 873N.E.2datl89. 

176. Id. at 190. 

177. See, e.g., Hieston v. State, 885 N.E.2d 59, 59 n.l (Ind. Ct. App.), trans, denied, 898 
N.E.2d 1226 (Ind. 2008); Williams v. State, 883 N.E.2d 192, 192 n.l (Ind. Ct. App. 2008). The 
online appellate docket first became available in October 2001. Douglas E. Cressler, Appellate 
Practice: A Year of Transition in Appellate Practice, 35 iND. L. REV. 1 133, 1 154 (2002). 


monitor filings in cases and confirm that a case, once fully briefed, has been 
transmitted from the clerk's office to the court. ^^^ 

C. Know When to Cite 

Pursuant to Appellate Rule 65(D), unpublished memorandum decisions 
"shall not be cited to any court except by the parties to the case to establish res 
judicata, collateral estoppel, or law of the case."^^^ The court of appeals had 
various opportunities to direct counsel to Appellate Rule 65 to remind them not 
to cite unpublished decisions/^^ Additionally, in Jackson v. State, ^^^ the court 
noted that counsel had cited an unpublished decision contrary to Appellate Rule 
65(D) and cautioned that "[a]lthough our memorandum decisions are now 
available online at, and have recently 
become available through commercial providers such as Westlaw, they are still 
unpublished memorandum decisions. Practitioners cannot assume that a decision 
from this court found online or in a commercial database is citable as 

In other decisions, the court of appeals reminded counsel that they risk 
having their arguments deemed waived if they do not cite to authority, ^^^ or the 
record,'^"^ as required by Appellate Rule 46(A)(8). Additionally, "[w]hen 
referring to specific material within a source, a citation should include both the 
page on which the source begins and the page on which the specific material 
appears" pursuant to Appellate Rule 22.^^^ In other words, when drafting 
appellate briefs, counsel should be mindful to appropriately cite authority to ease 
the appellate court's consideration of the issues or risk having the argument 
deemed waived. 

D. Include Copy of Appealed Order with Notice of Appeal 
and Brief of Appellant 

In Newman v. Jewish Community Center Ass'n of Indianapolis, ^^^ the 
appellant did not attach a copy of the trial court's order she was appealing to her 
notice of appeal, as required by Appellate Rule 9(F)(1).^^^ The appellees argued 

178. See Hieston, 885 N.E.2d at 59 n.l; Williams, 883 N.E.2d at 192 n.l 

179. IND. Apr R. 65(D). 

180. See, e.g., In re Paternity of C.H.W., 892 N.E.2d 166, 173 n.2 (Ind. Ct. App.), trans, 
denied, 898 N.E.2d 1229 (Ind. 2008); Weidman v. State, 890 N.E.2d 28, 31 n.l (Ind. Ct. App. 

181. 890 N.E.2d 1 1 (Ind. Ct. App. 2008). 

182. /J. at21n.4. 

183. Midwest Biohazards Servs., LLC v. Rodgers, 893 N.E.2d 1074, 1078 n.2 (Ind. Ct. App. 
2008), trans, denied. No. 41A05-CV-290, 2009 Ind. LEXIS 178, at *1 (Ind. Feb. 26, 2009). 

184. Davis v. State, 892 N.E.2d 156, 163 (Ind. Ct. App. 2008). 

185. Webb v. Schleutker, 891 N.E.2d 1 144, 1 155 n.7 (Ind. Ct. App. 2008). 

186. 875 N.E.2d 729 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 42 (Ind. 2008). 

187. /^. at 734. 

836 INDIANA LAW REVIEW [Vol. 42:813 

that, consequently, she had waived her arguments. The court of appeals noted 
that the appellees 

do not direct us to case precedent holding that such error is fatal to an 
appellant's claim. . . . Because of our penchant for addressing an 
appellant's claims on the merits, we decline to fmd that [appellant] has 
waived this issue on appeal and, instead, turn to the merits of her 

Appellate Rule 46(A) requires an appellant to include a copy of the appealed 
order with the appellant's brief. ^^^ Additionally, the court of appeals observed 
that a party's "attempt to incorporate the trial court's findings of fact and 
conclusions into her brief 'by reference'" instead of attaching the trial court's 
order "is not sufficient" to satisfy Appellate Rule 46(A). ^^° 

E. Adequate Briefing 

The supreme court and court of appeals cited Appellate Rule 46(A)(8) 
countless times for the premise that a party's failure to make a cogent argument 
results in waiver of the argument. ^^^ The court of appeals also cited Appellate 
Rule 46 to warn parties who inadequately drafted the statement of facts ^^^ and the 
statement of case^^^ sections of their brief. Although Appellate Rule 46(B)(1) 
"permits the appellee to omit the statement of issues, statement of the case, and 
the statement of facts if the appellee agrees with those statements as expressed 
in the appellant's brief," the court of appeals emphasized that the rule "requires 
the appellee to expressly state its agreement with appellant's statement." ^^'^ 
Additionally, all text in all briefs should be double spaced, except for "lengthy 

188. Id. 

189. Allen v. State, 893 N.E.2d 1092, 1095 n.3 (Ind. Ct. App. 2008), trans, denied. No. 
49A04-0710-CR-598, 2009 Ind. LEXIS 137, at *1 (Ind. Feb. 19, 2009); In re Petition for the 
Establishment of the Millpond Conservancy Dist., 891 N.E.2d 54, 55 n.l (Ind. Ct. App. 2008). 

190. Gleeson v. Preferred Sourcing, LLC, 883 N.E.2d 164, 171 n.5 (Ind. Ct. App. 2008). 
Nevertheless, the Gleeson court addressed the merits of the case. Id. at 171. 

191. See, e.g., Overstreet v. State, 877 N.E.2d 144, 153 n.4 (Ind. 2007), cert, denied, 129 S. 
Ct. 458 (2008); Triplett v. USX Corp., 893 N.E.2d 1 107, 1117 (Ind. Ct. App. 2008), trans, denied. 
No. 93A02-0803-EX-300, 2009 Ind. LEXIS 87, at *1 (Ind. Jan. 29, 2009); Engram v. State, 893 
N.E.2d 744, 747 (Ind. Ct. App. 2008), trans, denied; Patel v. United Inns, Inc., 887 N.E.2d 139, 
149 n.6 (Ind. Ct. App.), reh'g denied, 897 N.E.2d 945 (Ind. Ct. App. 2008). 

192. Wolljung V. Sidell, 89 1 N.E.2d 1 109, 1 1 10 n. 1 (Ind. Ct. App. 2008) (cautioning party that 
Appellate Rule 46(A)(6) requires a brief to include a statement of facts). 

193. Progressive Halcyon Ins. Co. v. Petty, 883 N.E.2d 854, 855 n.l (Ind. Ct. App.) 
(reminding party that statement of case must contain citations to the record pursuant to iND. APP. 
R. 46(A)(5)), trans, denied, 898 N.E.2d 1217 (Ind. 2008). 

194. J.R.W. ex rel. Jemerson v. Watterson, 877 N.E.2d 487, 488 n.l (Ind. Ct. App. 2007) 
(emphasis added). 


quotes and footnotes." ^^^ One panel expressly cited Galvan^^^ for the premise 
that not complying with the Appellate Rules can lead to dismissal of the 
appeal. ^^^ Appellate practitioners should make sure they comply with the 
Appellate Rules when drafting their briefs so that they do not waive arguments 
or risk having their appeal dismissed. 

F. Transcripts 

When ordering a transcript for the record on appeal, it is better to include 
more rather than less. In Titone v. State, ^"^^ the court of appeals dismissed an 
appeal because the appellant did not include a complete copy of the transcript. ^^^ 
Pursuant to Appellate Rule 9(F)(4), the general rule is that a transcript of all the 
evidence must be requested in criminal cases, unless the appeal is limited to an 
issue that does not require a transcript.^^^ However, ''[sjufficiency of the 
evidence is simply not one of those issues where the transcript of all the evidence 
cannot be requested."^^^ The Titone court concluded: 

As such, we hold that when a defendant challenges the sufficiency of the 
evidence, the defendant must request the transcript of all the evidence in 
the Notice of Appeal. And despite [the defendant's] suggestion on 
appeal, the State does not have an obligation to present the rest of the 
evidence. It is true that Appellate Rule 9(G) provides a mechanism 
whereby any party to an appeal may file a request for additional portions 
of the transcript. However, Appellate Rule 9(G) speaks in terms of 
"may," while Appellate Rule 9(F)(4) speaks in terms of "must." [The 
defendant] has not met his obligation of presenting a sufficient record for 
us to fairly decide his sufficiency of the evidence challenge [; thus], we 
dismiss his appeal.^^^ 

In Center Townhouse Corp. v. City of Mishawaka,^^^ the appellant included 
a limited portion of the transcript from the jury trial on damages but did not 

195. Decker v. Zengler, 883 N.E.2d 839, 840 n.l (Ind. Ct. App.) (citing iNfD. App. R. 43(E)), 
trans, denied, 898 N.E.2d 1224 (Ind. 2008). 

196. Galvan v. State, 877 N.E.2d 213, 216 (Ind. Ct. App. 2007); see also supra notes 166-76 
and accompanying text. 

197. Wolljung, 891 N.E.2d at lllOn.l. 

198. 882 N.E.2d 219 (Ind. Ct. App. 2008). 

199. /J. at 222-23. 

200. Id. at 222. This is not true in the civil context. As the court of appeals noted in Fields 
V. Conforti — a case profiled in last year's appellate procedure article — although "appellants did not 
submit a transcript of the bench trial [on] which the trial court's findings . . . and conclusions . . . 
were based," the court held that it would "'attempt' to address the appellants' arguments." Titone, 
882 N.E.2d at 222 n.4 (citing Fields v. Conforti, 868 N.E.2d 507, 511 (Ind. Ct. App. 2007)). 

201 . Titone, 882 N.E.2d at 222. 

202. Mat 222-23. 

203. 882 N.E.2d 762 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1218 (Ind. 2008). 

838 INDIANA LAW REVIEW [Vol. 42:813 

include the transcript from the bench trial where "the trial court determined a 
taking had occurred. "^^"^ Because the court of appeals "[did] not know what 
evidence was presented on the taking [s] claim, nor whether it supports the trial 
court's findings [,]" the court held that the appellant had waived its argument that 
there had not been a taking. ^^^ 

While the court of appeals typically considers an argument waived if the 
applicable transcripts are not included in the record on appeal, the Bailey v. State 
Farm Mutual Auto Insurance Co}^^ panel cited its penchant for addressing cases 
on the merits, despite its recognition of the "incomplete nature of the record."^^^ 
Therefore, the court went on to address the appellant' s arguments "as best we can 
through our examination of the portion of the trial record provided."^^^ 

In Baxter v. State,^^^ the court of appeals noted "some deficiencies with the 
transcript and volume of exhibits that were filed with this court."^*^ The 
transcript did not contain a separately-bound table of contents as required by 
Appellate Rule 28(A)(8) or a "cover page as required by Appellate Rule 28(A)(7) 
and Appellate Form 28-1."^'^ However, what the court found 

[m]ost problematic ... is the state of the exhibits volume, which does 
not appear to be in any discernible order and which lacks an overall 
index of exhibits, as required by Appellate Rule 29(A). This has made 
it difficult to find highly relevant exhibits. It is unclear whether 
responsibility for the disorderly exhibit volume rests upon the court 
reporter or a party who used the volume after the reporter filed it. We 
urge greater care in ensuring that orderly records are presented.^^^ 

G. Appendix Materials 

"[I]t is incumbent upon the parties to present [the court] with a complete 
appellate appendix."^^^ An appendix should include a table of contents^ ^"^ and all 
confidential documents should be printed on green paper pursuant to Appellate 

204. /J. at 769. 

205. Id. at 769-70 (citing IND. APP. R. 9(F)(4)). 

206. 881N.E.2d996(Ind.Ct. App. 2008). 

207. /J. at999n.l. 

208. Id. 

209. 891 N.E.2d 1 10 (Ind. Ct. App. 2008). 

210. Matll3n.2. 

211. Id. 

212. Id. 

213. Kovach v. Alpharma, Inc., 890 N.E.2d 55, 65 (Ind. Ct. App. 2008) (noting that the 
appellant's appendix fell "woefully short" and that the appellees had "omitted to rectify this 
oversight"), trans, granted. No. 49S04-0902-CV-88, 2009 Ind. LEXIS 160, at *1 (Ind. Feb. 27, 

214. Adams v. State, 890 N.E.2d 770, 771 n.4 (Ind. Ct. App. 2008) (citing Appellate Rule 
50(C)), trans, denied, 901 N.E.2d 1094 (Ind. 2009). 


Rule 9(J).2^^ Additionally, pursuant to Appellate Rule 50(A)(2)(f), it "is 
inappropriate for an appellant to include only its own documents in the appendix; 
instead, it must include all relevant documents, including those filed by the 
opposing party."^^^ That said, parties should not include unnecessary materials 
in an appendix. For example, when a transcript is included in the record on 
appeal, it is unnecessary to include lengthy portions of the transcript in the 

In cases like this, with numerous issues and a multivolume transcript, it 
is far more helpful (not to mention far more economical) for all parties 
to cite to the transcript and not to include large portions of the transcript 
in their appendices. ... As a final consideration, it is also helpful for 
each volume of a multi-volume appendix to have a table of contents for 
the entire appendix.^^^ 

"The appellate rules do not permit material to be included in a party's 
appendix that was not presented to the trial court. '"^^^ Although an appellant 
included several motions and trial court orders in its appendix that had been filed 
before the appellee had become involved in the litigation at the trial court level, 
the court of appeals noted that "our appellate rules instruct a party to include, 
among other things, 'pleadings and other documents from the Clerk's Record in 
chronological order that are necessary for the resolution of the issues raised on 
appeal[.]"'^^^ As a result, the court found it "difficult to fault [the appellant] for 
including such motions and orders. "^^° 

la American Family Mutual Insurance Co. v. Matusiak,^^^ the appellee asked 
the court of appeals to dismiss an appeal and impose sanctions on the appellant 
because the appellant' s appendix allegedly misrepresented the facts and required 
the appellees to expend an "unwarranted amount of time" to provide a "proper 
record."^^^ Although the court of appeals acknowledged Appellate Rule 50 and 
found that the appellant had failed to comply with the provision, it declined to 
dismiss the appeal or impose appellate sanctions. Interestingly, the court advised 

215. See, ^.g., Ramon v. State, 888 N.E.2d 244, 249 n.7 (Ind. Ct. App. 2008); Forgey v. State, 
886N.E.2d 16, 22 n. 15 (Ind. Ct. App. 2008); Gale v. State, 882 N.E.2d 808, 812 n.3 (Ind. Ct. App. 

216. Plaza Group Props., LLC v. Spencer County Plan Comm'n, 877 N.E.2d 877, 880 n.2 
(Ind. Ct. App. 2007), trans, denied, 891 N.E.2d (Ind. 2008); see also Kopka Landau & Pinkus v. 
Hansen, 874 N.E.2d 1065, 1069 n.3 (Ind. Ct. App. 2007). 

217. Dennerline v. Atterholt, 886 N.E.2d 582, 587 n.3 (Ind. Ct. App.) (construing Appellate 
Rule 50(A)), trans, dismissed, 898 N.E.2d 1230 (Ind. 2008). 

218. Bailey v. State Farm Mut. Auto Ins., 881 N.E.2d 996, 999 n.l (Ind. Ct. App. 2008) 
(quoting In re Contempt of Wabash Valley Hosp., Inc., 827 N.E.2d. 50, 57 n.6 (Ind. Ct. App. 

219. Id. (quoting iND. APP. R. 50(A)(2)(f)). 

220. Id. 

221. 878 N.E.2d 529 (Ind. Ct. App. 2007), trans, denied, 898 N.E.2d 1218 (Ind. 2008). 

222. /J. at533n.5. 

840 INDIANA LAW REVIEW [Vol. 42:813 

the appellee that "[i]nstead of requesting dismissal and sanctions, perhaps the 
better practice would have been to file a Motion for Conforming Appendix with 
this court, which almost certainly would have been granted, thereby saving [the 
appellees] 'the cost of completing the work that should have been done by [the 

H. Decorum^^"^ 

During the reporting term, the court of appeals had the opportunity to critique 
behavior it considered inappropriate. In City of East Chicago v. East Chicago 
Second Century, Inc.^^^ the court of appeals reminded counsel that the statement 
of facts should be "a concise narrative of the facts stated in accordance with the 
standard of review appropriate to the judgment or order being appealed, and it 
should not be argumentative. "^^^ By contrast, the court of appeals observed that 
the appellant's statement of facts was "a transparent attempt to discredit both the 
judgment and the opponents' character, and was plainly not intended to be a 
vehicle for informing this court."^^^ Additionally, the court noted that throughout 
its brief, the appellant had characterized its opponent's arguments as "bait and 
switch," a "transparent effort at legal 'sleight of hand,'" a "slick device," 
"specious," "a scattershot of undeveloped arguments," an "incredible position," 
"fiction," "ludicrous," and "silly."^^^ Although the court of appeals ultimately 
addressed the appellant's arguments on their merits, it reaffirmed statements 
from a prior case in which it chastised inappropriate conduct: 

Throughout the parties' briefs, they have launched rhetorical 
broadsides at each other which have nothing to do with the issues in this 
appeal. Counsels' comments concern their opposite numbers' 
intellectual skills, motivations, and supposed violations of the rules of 
common courtesy. Because similar irrelevant discourse is appearing 
with ever-increasing frequency in appellate briefs, we find it necessary 
to discuss the easily-answered question of whether haranguing 
condemnations of opposing counsel for supposed slights and off-record 
conduct unrelated to the issues at hand is appropriate fare for appellate 

At the outset, we point to the obvious: the judiciary, in fact and of 
necessity, has absolutely no interest in internecine battles over social 

223. Id. (citations omitted). 

224. The authors realize that the supreme court has granted transfer on both of the cases cited 
in the decorum section. However, it is their belief that comments regarding appropriate counsel 
behavior warrant citation. 

225. 878 N.E.2d 358 (Ind. Ct. App. 2007) (citing IND. APP. R. 46(A)(6)), trans, granted, 898 
N.E.2d 1219 (Ind. 2008). 

226. Id. at 365 n.2. 

227. Id. 

228. Id. (citations omitted). 


etiquette or the unprofessional personality clashes which frequently 
occur among opposing counsel these days. Irrelevant commentary 
thereon during the course of judicial proceedings does nothing but waste 
valuable judicial time. On appeal, it generates a voluminous number of 
useless briefing pages which have nothing to do with the issues 
presented, as in this appeal. 

Further, appellate counsel should realize, such petulant grousing has 
a deleterious effect on the appropriate commentary in such a brief. 
Material of this nature is akin to static in a radio broadcast. It tends to 
blot out legitimate argument. 

On a darker note, if such commentary in appellate briefs is actually 
directed to opposing counsel for the purpose of sticking hyperbolic barbs 
into his or her opposing numbers' psyche, the offending practitioner is 
clearly violating the intent and purpose of the appellate rules. In sum, 
we condemn the practice, and firmly request the elimination of such 
surplusage from future appellate brief s.^^^ 

After condemning counsel's behavior, the City of East Chicago court concluded 

[a] brief should not only present the issues to be decided on appeal, but 
it should be of material assistance to the court in deciding those issues. 
A brief is far more helpful to this court, and it advocates far more 
effectively for the client, when its focus is on the case before the court 
and not on counsel's opponent.^^^ 

The court of appeals commended opposing counsel "to the extent they have 
avoided responding in a similar tone to [the appellant's] arguments. "^^^ 

The court of appeals had another opportunity to criticize objectionable 
behavior in Henri v. CurtoP^ In the underlying action, Henri filed a civil suit 
against Curto, alleging that Curto raped her while they were students at Butler 
University. Although criminal charges were never filed, a Butler University 
''judicial official concluded that Curto had violated University rules and 
suspended [him] for four years."^^^ Curto filed a counterclaim against Henri, 
"alleging that [she] tortiously interfered with [his] contract with Butler 
University as a student enrolled in a degree program. "^^"^ After a trial, "the jury 
returned a unanimous verdict finding that Curto had not raped Henri, and that 
Henri tortiously interfered with Curto' s contract with [the] University . . . [and] 

229. Id. (quoting Amax Coal Co. v. Adams, 597 N.E.2d 350, 352 (Ind. Ct. App. 1992)). 

230. Id. (citing Young v. Butts, 685 N.E.2d 147, 151 (Ind. Ct. App. 1997)). 

231. Id. 

232. 891 N.E.2d 135 (Ind. Ct. App. 2008), rev'd, 2009 Ind. LEXIS 489 (Ind. 2009). 

233. Id. at 136. 

234. Mat 137. 

842 INDIANA LAW REVffiW [Vol. 42:813 

award[ed] Curto $45,000 on his counterclaim."^^^ 

On appeal, Henri included an introduction section in her brief of appellant 
and "contend[ed] that Henri was raped once by Curto and then raped again by the 
judicial system."^^^ Curto filed a motion to strike the introduction, which the 
court of appeals granted after noting that Appellate Rule 42 gives the court 
discretion to "strike from documents matter that is 'redundant, immaterial, 
impertinent, scandalous' or otherwise inappropriate. "^^^ The court of appeals 
concluded that "[t]he Introduction does not aid our consideration of the issues 
and is inappropriate [;]" therefore, it should be stricken.^^^ City of East Chicago 
and Henri demonstrate that the court of appeals will not tolerate inappropriate 
attacks on appeal. 

rv. Indiana's Appellate Courts 

A. Case Data from the Supreme Court 

During the 2008 fiscal year,^^^ the supreme court disposed of 1200 cases, 
issuing 168 majority opinions and published orders^"^^ and 42 non-dispositive 
opinions.^'** The supreme court heard oral argument in 74 cases — 30 criminal 
cases and 44 civil cases.^"^^ It decided seven capital cases — five on direct appeal 
and two on petitions for post-conviction relief. ^"^^ Of the supreme court's 1200 
dispositions, 657 were in criminal cases, 387 were in civil cases, 108 were 
attorney discipline matters, 41 were original actions, five were tax cases, one was 
a mandate of funds, and one was a petition for review of the State Board of Law 
Examiners.^"^ "[P]rior to 2006, the United States Supreme Court had not decided 
an appeal from the Indiana Supreme Court in approximately 25 years. "^"^^ 
However, in the past three years, the United States Supreme Court has decided 
two such appeals — Davis v. Washington^"^^ and Indiana v. Edwards?^^ 

In the 2008 Annual Report, the supreme court observed that of its 1200 

235. Id. 

236. M atl37n.3. 

237. Id. (quoting IND. APP. R. 42). 

238. Id. 

239. The supreme court 2008 fiscal year ran from July 1, 2007 through June 30, 2008. See 
Indiana Supreme Court Annual Report 2007-08, at 2 (2008), available at 
judiciary/supremeadmin/docs/0708report.pdf [hereinafter 2008 Annual Report]. 

240. Id. at 43-44. 

24 1 . Id. at 44 (non-dispositive opinions include concurring, dissenting, and concurring in part 
or dissenting in part opinions). 

242. Id. at 45. 

243. Id. 

244. Id. at 41. 

245. Id. at 2. 

246. 547 U.S. 813(2006). 

247. 128 S. Ct. 2379 (2008). 


dispositions, 1 105 had first been appealed to the court of appeals. ^"^^ Of the 1015 
petitions for transfer, "[t]he [s]upreme [c]ourt accepted jurisdiction and issued 
opinions in approximately 8% [of the cases] (12% in civil cases and 7% in 
criminal cases)."^"^^ In the remaining 92% of cases, the supreme court declined 
review, certifying the decision of the court of appeals.^^^ After conveying these 
statistics, the supreme court recognized that "[t]he appellate work of the Indiana 
Supreme Court would not be possible without the outstanding foundational work 
provided by the Indiana Court of Appeals, trial courts, and Tax Court."^^^ 

B. Other Supreme Court Endeavors 

On February 24, 2008, the five justices currently serving on the supreme 
court became the longest-serving supreme court in Indiana's history at 3040 
consecutive days.^^^ Technology was in the spotlight during the 2008 fiscal year, 
as evidenced by improvements made to the "Odyssey" case management system 
that "will eventually connect all Indiana courts and state agencies and improve 
public access to court records. "^^^ At the close of the fiscal year, the nine 
Monroe County Circuit Courts and the Washington Township Small Claims 
Court began using Odyssey to store and manage information on their cases. ^^"^ 
Additionally, the Courts in the Classroom project webcasted every supreme court 
oral argument and select court of appeals arguments, adding 87 arguments to the 
online archive where more than 460 oral arguments can be viewed.^^^ 

C. Case Data from the Court of Appeals 

During the 2008 calendar year, the court of appeals disposed of 2752 
cases — 2739 by majority opinion and 13 by order.^^^ The court of appeals heard 
78 oral arguments, including one stay hearing, and the average age of cases 
pending on December 3 1 , 2007 was 1 .6 months.^^^ The court handed down 7115 
miscellaneous orders, mainly on motions for additional time.^^^ Judge John T. 

248. 2008 Annual Report, supra note 239, at 2. 

249. Id. 

250. Id. 

251. Id. at 2-3. 

252. Id. at 5. The five justices that currently comprise the supreme court are : Chief Justice 
Randall T. Shepard and Justices Brent E. Dickson, Frank Sullivan, Jr., Theodore R. Boehm, and 
Robert D. Rucker. Id. 

253. Id. The Supreme Court's Judicial Technology and Automation Committee (JTAC) is 
responsible for the Odyssey program. Id. 

254. Id. 

255. Id. at 6. These oral arguments can be found at 

256. Court of Appeals of Indiana 2008 Annual Report, at 1 (2008), available at http.7/ 

257. Id. 

258. Id. 

844 INDIANA LAW REVIEW [Vol. 42: 8 1 3 

Sharpnack retired to become a Senior Judge on May 4, 2008, and Judge Elaine 
B. Brown was sworn in as a member of the court of appeals on May 5, 2008.^^^ 
The court of appeals continued its "Appeals on Wheels" program in 2008, 
which is the court's traveling oral argument program designed to familiarize 
Indiana residents with the court.^^^ For example, last year the court held oral 
arguments in the cities of Hammond, Lafayette, French Lick, Valparaiso, 
Muncie, Crawfordsville, Bloomington, and Evansville.^^^ 

D. Clever Prose from the Court of Appeals 

The court of appeals invoked humor and vivid imagery during the reporting 
term. For example, in his dissent to an unpublished memorandum decision. 
Judge James S. Kirsch summarized the facts of Gunkel v. Renovations, Inc?^^ as 

Multiple motions. Multiple hearings. Multiple judges. Parties 
admitting they entered into a contract, then denying that they entered 
into a contract. Bifurcated trials. Inconsistent positions. Inconsistent 
rulings. Summary judgments granted. Summary judgments denied. 
Summary judgments granted but not followed. Three appeals. Eight 
years and still unresolved. Attorney fees in excess of the amount in 

It will soon be ten years since the Gunkels entered into a contract for 
construction of their new home. During this decade, they have not been 
served well by either their contractors or our legal system. Were Dante 
Alighieri alive today, this case would provide him with the material to 
add a tenth circle to his Inferno and call it "Litigation Hell."^^^ 

In Henri v. Curto,^^"^ the court of appeals analyzed the effect of a bailiffs 
comment to a holdout juror in response to her question regarding whether the 
jury's verdict had to be unanimous. Citing the classic legal film "12 Angry 
Men," the court noted: 

A plausible effect of the judge's instruction would be that jurors in the 
minority who are adamant that the majority is wrong may hold out to 
prevent a verdict. However, the statement by the bailiff conveys that 
jurors in the minority would face the daunting task of swaying all the 
other jurors if they are to stick to their convictions, a task surmountable 

259. Id. at 2. 

260. See Indiana Court of Appeals, Oral Arguments, 
arguments.html (last visited June 18, 2009). 

261. Id. 

262. No. 76A03-0609-CV-407, slip op. at 28-29 (Ind. Ct. App. Jun. 27, 2008), trans, denied. 
No. 76S03-0901-CV-19, 2009 Ind. LEXIS 237 (Ind. Mar. 4, 2009). 

263. Id. 

264. 891 N.E.2d 135 (Ind. Ct. App. 2008), rev'd, 2009 Ind. LEXIS 489 (Ind. 2009). 


in less than two hours on the silver screen if you are Henry Fonda, but 
a task that could be overwhelming in real life for the average juror. ^^^ 

Li his dissent in Gray v. State, ^^^ an unpublished memorandum decision, 
Judge Michael P. Barnes expounded upon a clever observation he made in Davis 
V. State?^^ The issue in Davis was whether a BB gun could serve as a deadly 
weapon for purposes of elevating the crime from a class C to a class B felony 
based on the defendant's use of a deadly weapon.^^^ Rebuking the tendency to 
rely heavily on the victim' s belief or fear that the perpetrator was armed with a 
deadly weapon. Judge Barnes argued in Davis that 

[t]o the extent that the victims here were afraid of Davis and his 
accomplice, that is already a necessary element of the base offense of 
robbery as a class C felony. . . . The key factor, I believe, that 
distinguishes using a ''deadly weapon" to commit robbery and elevates 
it to a Class B felony is that there is an actual heightened risk of harm to 
the victim. ^^^ 

Judge Barnes observed that taken to its extreme, the majority position in Davis 
"could lead a finger or a stick of butter to be found a 'deadly weapon,' if a robber 
were to point the finger or stick of butter from underneath a coat and was able to 
convince the victim that it was actually a gun."^^° 

In Gray, Judge Barnes applied his logic from Davis and noted that "although 
this case does not involve a finger or a stick of butter, here an electric shaver has 
been converted into a gun. . . . There is no claim or argument on appeal that an 
electric shaver could be a deadly weapon."^^' Consequently, Judge Barnes 
dissented from the majority's decision and concluded that "[b]ecause of the lack 
of proof that Gray committed these crimes while armed with a deadly weapon, 
I vote to reduce his robbery convictions to Class C felonies."^^^ Regardless of 
whether one agrees with Judge Barnes's legal conclusion, the thought of a stick 
of butter serving as a deadly weapon does present a comical image to make his 


This survey term marked another productive year for Indiana's appellate 
courts. Although the Appellate Rules were reworked almost ten years ago, the 
supreme court and court of appeals continue to interpret and apply the rules to 

265. Id. at 142 (citing 12 ANGRY Men (Orion-Nova Productions 1957)). 

266. No. 10A01-0708-CR-356, slip op. at 22-24 (Ind. Ct. App. June 6, 2008), ajf'd, 903 
N.E.2d 940 (Ind. 2009). 

267. 835 N.E.2d 1 102 (Ind. Ct. App. 2005). 

268. Gray, No. 10A01-0708-CR-356, slip. op. at 22. 

269. Id. at 23 (quoting Davis, 835 N.E.2d at 1 1 17-18 (Barnes., J, concurring)). 

270. Id. (citing Davis, 835 N.E.2d at 1117). 

271. Mat 24. 

272. /J. at 24-25. 

846 INDIANA LAW REVIEW [Vol. 42:813 

refine appellate practice in Indiana and enhance the efficiency of our judicial 
system. Indiana's citizens, bench, and bar all benefit from the efforts of our 
appellate courts in this arena. 

Recent Developments in Indiana Business 
AND Contract Law 

Michael A. Dorelli* 

During the survey period,^ Indiana's courts rendered a number of significant 
decisions impacting businesses, as well as their owners, officers, directors and 
shareholders. The Indiana legislature also passed into law a new state Securities 
Act, providing clarification and uniformity regarding significant rules and 
regulations. These and other developments of interest to business litigators, and 
corporate transactional lawyers, as well as business owners and in-house counsel, 
are discussed herein. 

I. Securities Litigation and Regulation 

A. Director's Derivative Liability Under Indiana 's Securities Law 

In Lean v. Reed,^ the Indiana Supreme Court held that an outside director 
failed to meet his burden of proving the statutory "reasonable care" defense to 
personal liability for the corporation's securities registration and disclosure 
violations under Indiana' s Securities Law (ISL).^ The plaintiffs in Lean were the 
founders and shareholders of Abacus Computer Services, Inc. (Abacus)."^ In 
"very late March" of 2000, Galaxy Online, Inc. (GOLI), an internet business, 
entered into an agreement to acquire Abacus.^ Pursuant to the transaction, which 
closed on March 31, 2000, Abacus shareholders were issued 600,000 shares of 
GOLI common stock.^ The GOLI shares were not registered as "securities" in 

The plaintiffs sued GOLI, an affiliated company, and 10 individuals who 
were officers, directors, or controlling persons of GOLI, alleging the "sale of 
unregistered securities in violation of section 3 of the ISL^ and material 
misrepresentations and omissions in violation of section 12(2)."^ The plaintiffs' 

* Partner, Hoover Hull LLP, Indianapolis, Indiana. B.S., 1994, Indiana University — 
Bloomington; J.D., 1998, magna cum laude, Indiana University School of Law — Indianapolis. The 
views expressed herein are solely those of the author. 

1 . This Article discusses select Indiana Supreme Court and Indiana Court of Appeals 
decisions during the survey period — i.e., from October 1, 2007, through September 30, 2008, 
except where otherwise indicated — as well as significant statutory developments during the survey 

2. 876 N.E.2dl 104 (Ind. 2007). 

3. Id. at II 13-14. At the time of the Lean decision, the ISL was found at sections 23-2-1-1 
to 25 of the Indiana Code. 

4. /^. at 1105-06. 

5. Mat 1106. 

6. Id. 
1. Id. 

8. See iND. Code § 23-2- 1 -3 (2007) (providing that "[i]t is unlawful for any person to offer 
or sell any security in Indiana unless it is registered [or it] is exempted [from registration]"). 

9. Lean, 876 N.E.2d at 1 106; see also iND. CODE § 23-2-1-12 (2007) (providing that "[i]t 

848 INDIANA LAW REVIEW [Vol. 42: 847 

claims against the individual defendants, including Lean, were based on the 
"derivative liability" provisions found in section 19(d) of the ISL, which 
provides, in relevant part: 

[A] partner, officer or director of [a person liable under the ISL] [is] also 
liable jointly and severally with and to the extent as the person, unless 
the person who is liable sustains the burden of proof that the person did 
not know and in the exercise of reasonable care could not have known, 
of the existence of the facts by reason of which the liability is alleged to 
exist }^ 

The "net effect of [the above-cited provisions of the ISL] is that a director of a 
selling corporation who cannot sustain the reasonable care defense is liable for 
both registration and disclosure violations by the corporation."^^ 

The plaintiffs moved for summary judgment against Lean, arguing that Lean 
was liable pursuant to section 19(d).^^ The trial court granted summary judgment 
in favor of the plaintiffs, rejecting Lean's "reasonable care" defense. ^^ The 
Indiana Court of Appeals affirmed the trial court's ruling,^"^ and the Indiana 
Supreme Court granted transfer. ^^ On transfer. Lean argued "that, as a matter of 
law, it is reasonable care for a director to assume that management and its 
advisors have taken the appropriate steps to comply with legal requirements."^^ 
Lean argued "that this is particularly true of a director new to the board at the 
time the securities transaction is approved." ^^ Lean conceded that he voted in 
favor of the transaction at the March 28, 2000, meeting of GOLI's board of 
directors, and that he "did not ask any questions that would have allowed him to 
discover that the stock being sold by GOLI was not registered." ^^ Alternatively, 
on transfer. Lean argued that "summary judgment is never appropriate to resolve 
a question of 'reasonable care' because it is ultimately a question for the trier of 

is unlawful for any person in connection with the offer, sale or purchase of any security, either 
directly or indirectly, ... (2) to make any untrue statements of material fact or to omit to state a 
material fact necessary in order to make the statement made in light of the circumstances under 
which they are made, not misleading"). 

10. IND. Code § 23-2-l-19(d) (2007) (emphasis added). 

11. L^a«, 876N.E.2datll07. 

12. /^. at 1106. 

13. Id. 

14. Id. at 1 107 (citing Lean v. Reed, 854 N.E.2d 79 (Ind. Ct. App. 2006)). 

15. Id. 

16. Mat 1108. 

17. Id. Lean was elected to the GOLI board of directors on February 1 8, 2000, i.e., just over 
a month before the Abacus transaction was approved and closed. Id. at 1111. Lean's first board 
meeting, at which the transaction was approved, was on March 28, 2000 — just thirty nine days after 
Lean was elected a director and three days before the transaction closed. Id. at 1111-12, 

18. Mat 1112. 

19. Mat 1108. 


The court in Lean encapsulated the issue before it as follows: "[WJhether it 
is sufficient for an outside director to assume compliance with all applicable laws 
with no explicit assurance from anyone, no documentation, and in the face of a 
number of facts that raise obvious points of inquiry ."^^ The court explained that 
"a director can reasonably rely on assertions from counsel and others with 
expertise as to some legal conclusions."^^ However, the court found that, in this 
case, "there was no evidence of assurance from counsel, whether made directly 
by counsel or not, that the law applicable to the Abacus acquisition had been 
examined and that the transaction conformed to all applicable law."^^ Further, 
there was no "evidence that lawyers familiar with securities or financing issues 
had reviewed the transaction."^^ Based on the "undisputed facts," the court in 
Lean concluded, "Lean knew, or in the exercise of reasonable care could have 
known, that the disputed transaction involved the unlawful issuance of 
unregistered securities. Accordingly, we hold as a matter of law the defense of 
reasonable care was not established."^"^ 

Finally, the court rejected Lean's argument that the issue of "reasonable 
care" under section 19(d) is always a question of fact, i.e., that resolution of the 
"reasonable care" defense is inappropriate for summary judgment disposition.^^ 
The court agreed that "summary judgment is rarely appropriate as to a director's 
reasonable care."^^ However, the court explained, "in extreme cases conduct 
may be reasonable or unreasonable as a matter of law just as negligence may be 
established as a matter of law."^^ The court described its bases for finding 
"legal" disposition appropriate in this case, as follows: 

If Lean had been told by a respectable authority that his transaction 
complied with legal requirements, it would create a factual issue as to 
the reasonableness of his unquestioning acceptance. But the undisputed 
facts of this case are that Lean assumed this transaction complied with 
applicable law based on no assurance or documentation from anyone. 
A director who makes this assumption does not meet the standard 
required by the ISL that in the exercise of reasonable care he could not 
have known of the facts constituting the violation. ^^ 

"Reasonable inquiry, or receipt of reasonable assurance, is one thing," the court 
explained.^^ "But blind assumption that all is well leaves the investing public in 


Mat 1111. 










Mat 1113-14, 


Mat 1113. 




M. at 11 13-14 


M. at 1114. 

850 INDIANA LAW REVIEW [Vol. 42:847 

the same position as if there were no directors of the corporation. "^° The ISL 
"requires more of a director than a simple assumption that all is well."^^ 

B. Indiana 's New Uniform Securities Act 

Effective July 1 , 2008, the Indiana General Assembly passed the new Indiana 
Uniform Securities Act (the lUSA),^^ which is patterned, in large part, on the 
Uniform Securities Act of 2002. The new lUSA is now found at Article 19 of 
Title 23 of the Indiana Code, and is comprised of 6 chapters covering the 
following subject matter: 

Chapter 1 : General provisions,^^ including a more detailed and 
thorough "definitions" section;^"^ 

Chapter 2: Exemptions from registration and disclosure 
requirements of the lUSA;^^ 

Chapter 3: Registration of securities and notice filing of "federal 
covered securities ;"^^ 

Chapter 4: Broker-dealers, agents, investment advisers, investment 
adviser representatives, and federal covered investment 
advisers ;^^ 

Chapter 5 : Fraud and liabilities, including provisions dictating both 
criminal penalties and civil liability;^^ and 

Chapter 6: Administration and judicial review. 


Although a detailed evaluation of the lUSA, its differences from the prior 
version of the Act and its impact on practitioners going forward is outside the 
scope of this Article, a brief summary of just a few of the noteworthy changes 

30. Id. 

31. Id. The Indiana Supreme Court affirmed the trial court's grant of summary judgment 
against Lean on the "reasonable care" defense. Id. 

32. IND.CODE §§ 23-19-1-1 to -6-1 1 (2008). Thepredecessor version of Indiana's Securities 
Act, enacted in 1961 and based on the Uniform Securities Act of 1956, was found at Article 2 of 
Title 23. 

33. IND. Code §§23-19-1-1 to -5. 

34. Id. § 23-19-1-2. 

35. Id. §§23-19-2-1 to -4. 

36. /^.§§ 23-19-3-1 to -7. 

37. M§§ 23-19-4-1 to -12. 

38. Id §§23-19-5-1 to -10. 

39. Id §§23-19-6-1 to -11. 


1. ''Investment Contract'' Includes Interest in a Limited Liability 
Company. — The "definitions" section of the lUS A is more detailed than that of 
the predecessor Act. Significantly, the lUS A' s definition of a "security," which, 
like the predecessor version of the Act, includes an "investment contract," now 
includes five sub-sections describing specific categories of investment vehicles 
that are "include[d]" or not "include[d]" within the definition."^^ One of those 
sub-sections provides that the definition of a "security" specifically "includes as 
an 'investment contract', among other contracts, an interest in a . . . limited 
liability company .''"^^ The lUS A does not expressly clarify whether all "interests" 
in limited liability companies will meet the definition of a "security.""^^ Prior to 
enactment of the lUSA, whether or not an interest in an LLC was a "security" 
depended on whether the interest met the definition of an "investment contract," 
as defined by applicable case law."^^ Arguably, the specification in the lUS A that 
the definition of a security "includes as an 'investment contract' ""^"^ an interest in 
an LLC indicates that the test for an "investment contract" must still be satisfied. 
In other words, an LLC interest may have been included within the definitional 
section to clarify that an LLC interest can, if the applicable test for an 
"investment contract" is satisfied, constitute a "security" under the lUSA."^^ 

2. Private Placement Exemption Replaced with ''Self-Executing " Limited 
Offering Exemption, — The detailed private placement exemption contained in the 
predecessor Act"^^ has been replaced in the lUSA with a simplified "self- 
executing" exemption for limited offerings."^^ The new exemption does not 
require the filing of an offering statement or other written materials (as did the 
predecessor private placement exemption, depending on the size of the offering 
and characteristics of the offerees) — i.e., it is "self-executing" — as long as the 
conditions dictated therein are satisfied."^^ Generally, the new limited offering 
exemption applies to transactions meeting the following criteria: (1) the issue is 

40. See id. § 23-19-l-2(28)(A)-(E). 

41. M § 23-19- 1-1(28)(E) (emphasis added). 

42. See id. 

43. See, e.g., SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946) (defining "investment 
contract" as "a contract, transaction or scheme whereby a person invests his money in a common 
enterprise and is led to expect profits solely from the efforts of the promoter or a third party"). 

44. See IND. CODE § 23-19-l-2(28)(E) (2008). 

45. The test for an "investment contract," as described by Howey and its progeny, appears to 
have been codified in section 2(28)(D) of the JUS A, which provides the following: 

[The definition of a "security"] includes as an "investment contract" an investment in 
a common enterprise with the expectation of profits to be derived primarily from the 
efforts of a person other than the investor and a "common enterprise" means an 
enterprise in which the fortunes of the investor are interwoven with those of either the 
person offering the investment, a third party, or other investors .... 
Id. § 23-19-l-2(28)(D). 

46. iND. Code § 23-2-l-2(b)(10) (2007). 

47. iND. Code § 23-19-2-2(14) (2008). 

48. Id. 

852 INDIANA LAW REVIEW [Vol. 42:847 

made to "not more than twenty-five purchasers . . . other than ['institutional 
investors']"; (2) a "general solicitation or general advertising is not made in 
connection with the offer to sell or sale of the securities;" (3) no "commission or 
other remuneration" is paid "or given, directly or indirectly," to an unregistered 
broker or agent; and (4) "the issuer reasonably believes that all the purchasers . 
. . are purchasing for investment.""^^ 

3. Registration of ''Finders. " — Under the new lUSA, so-called "finders" — 
i.e., "agents" representing issuers with respect to an offer or sale of the issuer's 
securities — must be registered under the lUSA if they are "compensated in 
connection with the individual's participation by the payment of commissions or 
other remuneration based, directly or indirectly, on transactions in those 
securities. "^^ Individuals representing issuers "in connection with \h& purchase 
of the issuer's own securities"^* are exempt from registration.^^ 

4. Registration of ''Investment Advisers/' — The "investment adviser" 
exemption now provides that investment advisers with "no more than five (5) 
clients that are resident in [Indiana]" are exempt from registration only if the 
investment adviser has no "place of business in this state."^^ 

5. Fraud and Liabilities, Including "Control Person" and Director 
Liability. — The fraud and liability provisions of the lUS A remain substantially 
unchanged from the predecessor Act's analogous provisions. It continues to be 
"unlawful for a person, in connection with the offer, sale or purchase of a 
security, directly or indirectly [,]"^'^ to do any of the following: 

(1) to employ a device, scheme, or artifice to defraud; (2) to make an 
untrue statement of a material fact or to omit to state a material fact 
necessary in order to make the statement made, in the light of the 
circumstances under which they were made, not misleading; or (3) to 
engage in an act, practice, or course of business that operates or would 
operate as a fraud or deceit upon another person.^^ 

The "knowing" violation of Article 5, with specified exceptions, constitutes a 
Class C felony.^^ Civil liability is imposed on a "person" who sells a security in 
violation of Article 5, unless "the person selling the security sustains the burden 
of proof that either the person did not know, and in the exercise of reasonable 
care could not have known, of the violation or the purchaser knowingly 
participated in the violation."^^ 

Joint and several liability continues to be imposed on (1) a person that 

49. Id. 

50. Id. § 23-19-4-2(a), (b)(3). 

51. /J. § 23-19-4-2(b)(7) (emphasis added). 

52. Id. 

53. Id. § 23-19-4-3(b)(2). 

54. M §23-19-5-1. 

55. Id. §23-19-5-1 to -1(3). 

56. Id. § 23-19-5-8(a). 

57. Id § 23-19-5-9(a). 


"directly or indirectly controls a person liable under [the civil liability provisions 
of the lUSA]"^^ and (2) an individual "who is a managing partner, executive 
officer, or director of a person liable under [the civil liability pro visions], "^^ 
unless the "controlling person" or the "individual" partner, officer or director 
sustains the burden of proof that he or she "did not know, and in the exercise of 
reasonable care could not have known, of the existence of conduct by reason of 
which the liabihty is alleged to exist."^^ Other than minor changes, the "joint and 
several" liability provisions, including the statement of the "reasonable care" 
defense thereto, remain unchanged from the prior statute. As such, the analysis 
of the "reasonable care" defense outlined by the Lidiana Supreme Court in Lean 
V. Reed,^^ discussed above, remains good law.^^ 

n. Corporate and Shareholder Liability 

A. Piercing the Corporate Veil — ''Alter Ego'' Doctrine 

In Massey v. Conseco Services, LLC,^^ the court ruled that a subsidiary 
corporation that loaned money to a director of a parent corporation (in order to 
purchase stock of the parent corporation) was not an "alter ego" of the parent 
corporation, for purposes of the director's defenses against the parent.^"^ From 
1996 to 2000, Conseco, Inc. (Conseco) had a program "known as the D&O Loan 
Program" (the Program). Pursuant to the Program, Conseco made arrangements 
with several banks to loan money to its directors and officers for the purchase of 
Conseco stock. ^^ "Conseco guaranteed the loans."^^ Conseco' s subsidiary, 
Conseco Services, LLC (Conseco Services), also loaned money to the directors 
and officers "to cover the interest owed on the loans from the banks. "^^ 

The plaintiff participated in the Program from 1996 to 2000, borrowing 
approximately $ 1 5 million to purchase Conseco stock.^^ The plaintiff also signed 
a promissory note in favor of Conseco Services, to cover interest on his bank loan 
in the amount of more than $4 million.^^ In April 2000, Conseco "acknowledged 
that it had overstated its income on its quarterly financial statements in 1999 by 
$376.6 million.^^ "The value of Conseco shares dropped as the maturity date on 

58. Id. § 23-19-5-9(d)(l). 

59. M§23-19-5-9(d)(2). 

60. Id. § 23-19-5-9(d)(2). 

61. 876 N.E.2d 1 104 (Ind. 2007). 

62. Compare iND. CODE § 23-2-l-19(d) (2007), with iND. CODE § 23-19-5-9(d)(2) (2008). 

63. 879 N.E.2d 605 (Ind. Ct. App. 2008). 

64. Mat 609-10. 

65. /J. at 607. 

66. Id. 

67. Id. 

68. Id. 

69. Id. 

70. Id. 

854 INDIANA LAW REVIEW [Vol. 42:847 

[the plaintiffs] Note with Conseco Services approached."^ ^ 

In December 2002, the plaintiffs stock lost all its value when Conseco filed 
for bankruptcy.^^ Conseco Services sued the plaintiff on the note he executed to 
cover interest on the bank loans, and the plaintiff asserted several affirmative 
defenses and counterclaims, primarily based on the conduct of Conseco. ^^ In 
other words, the plaintiff asserted defenses and counterclaims seeking "to hold 
Conseco Services liable by alleging Conseco Services is the alter ego of 

The court in Massey explained the "alter ego" theory as follows: 

"The legal fiction of a corporation may be disregarded where one 
corporation is so organized and controlled and its affairs so conducted 
that it is a mere instrumentality or adjunct of another corporation. 
Indiana courts refuse to recognize corporations as separate entities where 
the facts establish that several corporations are acting as the same 

The court continued, explaining that "[t]he party seeking to pierce the corporate 
veil bears the burden of proving the corporate form was so ignored, controlled 
or manipulated that it was merely the instrumentality of another and that the 
misuse of the corporate form would constitute a fraud or promote injustice."'^ 

In affirming the trial court's summary judgment ruling, as a matter of law, 
the court in Massey explained that the "alter ego" doctrine "may be invoked to 
prevent fraud or unfairness to third parties."''^ The court concluded that the 
plaintiff "was an outside director, but he was not a third party. He was a director 
of Conseco and understood the corporate organization of Conseco and Conseco 
Services."'^ The court also concluded that the plaintiff failed to designate any 
evidence that the corporations "abused the corporate form or that such abuse 
would result in a fraud or injustice to him."'^ The court held that the plaintiff 
"could not treat Conseco Services as the alter ego of Conseco."^^ 

In French-Tex Cleaners, Inc. v. Cafaro Co.,^^ the court held that a 
corporation that shared office space with a landlord was not liable for the 
landlord's alleged breach of contract (or conversion) under "alter ego" or 

71. /J. at 608. 

72. Id. 

73. Id. at 608-09. 

74. Mat 609. 

75. Id. (quoting Oliver V. Pinnacle Homes, Inc., 769N.E.2d 11 88, 1 191 (Ind. Ct. App. 2002)) 
(internal quotations omitted). 

76. Id. (internal quotations omitted). 

77. Id. 

78. Id. 

79. Id. 

80. Id. 

81. 893 N.E.2d 1156 (Ind. Ct. App. 2008). 


piercing the corporate veil theories. ^^ The landlord and tenant in French-Tex 
became involved in a dispute regarding real estate taxes.^^ The dispute led to the 
tenant, a dry cleaning business, filing a class action complaint, alleging that the 
landlord and the second corporation, Cafaro, overcharged the tenant (and other 
commercial tenants of various shopping centers) for their shares of property 
taxes.^"^ The tenant alleged breach of contract, conversion, unjust enrichment, 
and fraud.^^ Although Cafaro was not a party to the subject lease, the tenant 
alleged that the two defendants shared office space, telephone and computer 
systems, and some officers. Further, the tenant alleged that the landlord's 
invoices were actually prepared by Cafaro' s employees, and other issues that 
allegedly gave rise to liability.^^ The trial court granted summary judgment in 
favor of Cafaro, and the tenant appealed.^^ 

The court recognized that although Cafaro was not a party to the lease, 
"liability could be imputed ... if Cafaro was acting as [the landlord's] alter 
ego."^^ The court explained that it was the tenant's burden to establish that the 
landlord "was so ignored, controlled, or manipulated that it was merely the 
instrumentality of Cafaro and that the misuse of the corporate form would 
constitute a fraud or promote injustice."^^ The court enumerated the categories 
of evidence required to satisfy the tenant's burden of proof on the tenant's "alter 
ego" theory: 

(1) [The landlord's] undercapitalization; (2) absence of corporate 
records; (3) fraudulent representation by the corporation shareholders or 
directors; (4) use of the corporation to promote fraud, injustice or illegal 
activities; (5) payment by the corporation of individual obligations; (6) 
commingling of assets and affairs; (7) failure to observe required 
corporate formalities; or (8) other shareholder acts or conduct ignoring, 
controlling, or manipulating the corporate form.^^ 

The court of appeals concluded that "[l]ike the trial court, we find no genuine 
issue of material fact regarding Cafaro' s liability for breach of contract under the 
[lease between the landlord and tenant]. "^^ The court summarized the respective 
parties' arguments and "facts" relied upon in support, but did not analyze the 
facts or specify which of them was persuasive or dispositive on the issue.^^ 

82. Mat 1169. 

83. Mat 1159-60. 

84. M. at 1160. 

85. Id. 

86. Id. 

87. Id. 

88. M. at 1168. 

89. M. at 1168-69. 

90. Id. at 1169. 

91. Id. 

92. Id. 

856 INDIANA LAW REVIEW [Vol. 42:847 

B. Corporate Liability for Criminal Act of Employee 

In Prime Mortgage USA, Inc. v. Nichols^^ the court held that a corporation 
could be held liable for its employee-shareholder's forgery of a share 
authorization form, allegedly causing damage to the other shareholder.^"^ 
Specifically, the plaintiff and defendant shareholders — Nichols and Law, 
respectively — were, at one time, the sole shareholders of the corporation.^^ The 
business relationship between the shareholders deteriorated, and Nichols decided 
she wanted to sell her stock.^^ The parties were unable to negotiate a buyout; so, 
Nichols filed a complaint seeking appointment of a receiver and dissolution, 
arguing that she and Law each owned half of the company's shares.^^ Law 
responded, claiming that he had previously issued company stock to his daughter 
and another company employee, pursuant to a share authorization document 
allegedly signed by Nichols. ^^ Nichols later learned that Law had forged her 
signature on the share authorization document and sought, among other things, 
to hold both Law and the corporation liable for the forgery under Indiana' s crime 
victims statute. ^^ 

Pursuant to section 35-41-2-3 of the Indiana Code 

[A] corporation may be held liable for an employee's criminal acts as 
long as the employee was acting within the scope of employment. The 
company may be held liable, if the employee's purpose, was to an 
appreciable extent, to further his employer' s business, even if the act was 
predominantly motivated by an intention to benefit the employee 
himself. Even if a particular act was not authorized by the corporation, 
if there is a sufficient association between the authorized acts and the 
unauthorized acts, the unauthorized acts may fall within the scope of 
employment. ^^^ 

The court in Nichols stated that "[a]n elaborate discussion on this point is not 
necessary to explain [its] conclusion that Law was acting within the scope of his 
employment when he forged Nichols' name."^^^ According to the court, although 
Law forged the share authorization document with the intent to benefit himself 
to the detriment of Nichols, the act also furthered the corporation's business. ^^^ 
As such, the court concluded that the corporation could be held liable under 

93. 885 N.E.2d 628 (Ind. Ct. App. 2008). 

94. Id. 2X655. 

95. Id. at 631. 

96. Id. 

97. Id. 

98. Id. 

99. Id. at 637-38; see also iND. CODE § 34-24-3-1 (2008). 

100. Id. at 654-55 (internal quotations omitted). 

101. /^. at 655 

102. Id. 


Indiana's crime victims statute. ^^^ 

C. Doctrine of Contribution Applied to Shareholders of Failed Business 

In Balvich v. Spicer,^^"^ the Indiana Court of Appeals discussed the doctrine 
of "contribution" in the context of shareholders of a failed Hardee's franchise 
business. ^^^ The Balviches and the Spicers owned varying interests in the 
corporate entities that owned the franchises. ^^^ The corporations had obtained 
more than $700,000 in loans from Bank One and AT&T Financial Corporation. '^^ 
When the franchises began to fail, the corporations defaulted on the loans and the 
lenders foreclosed. ^^^ The shareholders had personally guarantied the loans and, 
ultimately, judgments were entered against them.^^^ The Spicers paid 
significantly more than the Balviches to release their obligations under the 
judgments. ^^^ The corporations also owed past due amounts for state sales tax 
and employee withholding taxes.^^^ The Spicers paid approximately $75,000 to 
satisfy the corporations' tax obligations. ^^^ 

The Spicers filed an action against the Balviches for contribution regarding 
the amounts paid in connection with the Bank One, AT&T and state tax 
payments. ^^^ The trial court entered judgment in favor of the Spicers and the 
Balviches appealed. ^ ^"^ 

After finding that the Spicer's claims were not barred by the applicable 
statute of limitations, the court in Spice r turned to the contribution claim, 
explaining that "the doctrine of contribution rests on the principle that where 
parties stand in equal right, equality of burden becomes equity."^ ^^ Further, the 
court explained: "[T]he right of contribution is based upon natural Justice, and 
it applies to any relation, including that of joint contractors, where equity 
between the parties is equality of burden, and one of them discharges more than 
his share of the common obligation."^ ^^ The court also noted that section 26-1- 
3.1-1 16 of the Indiana Code provides, in relevant part, that "a party having joint 
and several liability who pays the instrument is entitled to receive from any party 

103. Id. 

104. 894 N.E.2d 235 (Ind. Ct. App. 2008). 

105. Id. at 237. The Hardee' s franchises were located throughout Indiana and were owned by 
several separate corporations of which the parties in Spice r were shareholders. Id. 

106. Id. 

107. Id. 

108. Id. 

109. Id. 

110. Id. 

111. Id. 

112. /J. at 238. 

113. Id. 

114. /J. at 238, 242. 

115. /<i. at 245 (internal quotations omitted). 

116. Id. (internal quotations omitted). 

858 INDIANA LAW REVIEW [Vol. 42:847 

having the same joint and several liability contribution in accordance with 
applicable law. " ' ^ ^ 

The court in Spicer found that the evidence supported the trial court's ruling 
in favor of contribution from the Balviches, because they were jointly and 
severally liable under their personal guaranties.' ^^ The court also rejected the 
Balviches' statutory argument that contribution could not be pursued because the 
judgments had not been paid "in full" or "in their entirety."''^ Finally, the court 
ruled that the trial court had jurisdiction to award contribution regarding the state 
tax liability. '^^ The court explained that the "propriety of imposition of a 
tax" — which arguably would have been within the exclusive jurisdiction of the 
Indiana Tax Court — was not at issue. '^' Rather, the issue was whether 
contribution for the amount paid by the Spicers was proper. '^^ 

in. "Authority" of Executive Director and "Removed" Director 
TO File Action Against Board Members 

In Martindale Brightwood CDC v. Gore}^^ the court held that a non-profit 
corporation's executive director lacked standing to file suit against board 
members, but that a "removed" director was authorized by statute to allege that 
his removal was invalid and improper. ^^'^ The executive director and the recently 
"removed" director filed suit against the corporation's board members, alleging 
breach of contract, intentional interference with contract, misfeasance, breach of 
fiduciary duty, and breach of the standard of care of directors. *^^ The board 
members moved to dismiss, for failure to name the real party in interest, arguing 
that neither the executive director nor the former director was authorized by 
statute to file suit.^^^ The trial court granted the motion to dismiss. ^^^ 

Section 23-17-4-4(b) of the Indiana Code provides, "A corporation's power 
to act may be challenged in a proceeding against the corporation for a declaratory 
judgment or to enjoin an act where a third party has not acquired rights. The 
proceeding may be brought by the Attorney General or a directorT^^^ A 
"director" is defined in the statute as "an individual designated in articles of 
incorporation or bylaws, elected by the incorporators or otherwise elected or 

117. M (quoting IND. CODE § 26-1-3.1-1 16). 

118. Id. 

119. Id. at 247 (discussing iND. CODE § 34-22-1-6 (2006)). 

120. /^. at 247-48. 

121. /^. at 248. 

122. /^. at 248-49. 

123. 878 N.E.2d 1280 (Ind. Ct. App. 2008). 

124. Id. at 1284, 1285. 

125. Mat 1281. 

126. /^. at 1281-82. 

127. Id. at 1282. 

128. Id. at 1283 (quoting iND. CODE § 23-17-4-4(b) (2007)). 


appointed, to act as a member of a board of directors. ""^^^ 

Regarding the executive director, the court in Martindale rejected the 
executive director's argument that, pursuant to the corporation's by-laws, she 
was a ''non-voting member" of the board. '^^ Specifically, the court explained that 
the by-laws merely provide that the executive director will attend meetings of the 
board of directors, but they "in no way [designate] the Executive Director as a 
person to act as a member of [the board of directors] ."^^^ Further, pursuant to the 
executive director' s employment agreement with the corporation, the executive 
director was required to "report to" the board, "advise" the board, and "see that 
all orders and resolutions of the [board were] carried into effect."^^^ The court 
concluded that the executive director "clearly was an employee of [the 
corporation] and not a director as she argue[d]."^^^ 

Regarding the "removed" director, the director alleged in the complaint that 
his removal from the board was "improper" and "invalid," in that it was not done 
in compliance with the corporation' s by-laws. ^^"^ The court directed that in ruling 
on a motion to dismiss, "it must accept as true the facts alleged in the 
complaint." ^^^ As such, the court accepted as true the fact that the director- 
plaintiff's removal was "improper and therefore void."^^^ If his removal was 
void, the court explained, "he would have standing to bring a proceeding 
pursuant to Indiana Code section 23-17-4-4(b)."^^^ Therefore, the court reversed 
the trial court's dismissal of the director's complaint on standing grounds. ^^^ 

IV. Inspection of Corporate Books and Records 

In Bacompt Systems, Inc. v. Peck,^^^ the court of appeals concluded that a 
hearing on a petition to inspect corporate records "constituted a trial within the 
meaning of [Indiana] Trial Rule ^SCA)."^"^^ As such, the court held, it was 
improper for the trial court to base its findings and conclusions regarding 
whether a "proper purpose" for the inspection existed on an affidavit. ^"^^ Rather, 

129. Id. (quoting IND. CODE § 23-17-2-9 (2007)). 

130. Id. 

131. Id. 

132. Id. 

133. Id. The court in Martindale also noted that the corporation's articles of incorporation 
provide that directors "shall be elected." Id. at 1284. The executive director was appointed — not 
elected — further refuting her argument that she was a "director" within the meaning of the 
corporation's articles. Id. 

134. Id. at 1284. 

135. Id. at 1285 (citing Trail v. Boys & Girls Clubs, 845 N.E.2d 130, 134 (Ind. 2006)). 

136. Id. 

137. Id. 

138. Id. 

139. 879 N.E.2d 1 (Ind. Ct. App. 2008). 

140. Id. Sit 5. 

141. Id. 

860 INDIANA LAW REVIEW [Vol. 42: 847 

live testimony was required, in open court. '"^^ 

Section 23-1-52-2 of the Indiana Code provides, in relevant part: "A 
shareholder of a corporation is entitled to inspect and copy, during regular 
business hours at a reasonable location specified by the corporation, [various 
categories of] records of the corporation ... if ... the shareholder's demand is 
made in good faith and for a proper purpose." ^"^^ 

One of the parties seeking records in Bacompt filed an affidavit in support 
of the petition, stating "that she needed access to [the requested] corporate 
records in order to value her stock in her pending divorce proceeding."^"^"^ The 
trial court concluded that a "proper purpose" had been demonstrated and granted 
the petition. ^"^^ 

On appeal, the corporation argued, among other things, that the trial court's 
reliance on the petitioner's affidavit violated Indiana Trial Rule 43(A), which 
provides that "[i]n all trials the testimony of witnesses shall be taken in open 
court." ^"^^ The court of appeals agreed, describing the nature of a hearing on a 
petition to inspect corporate records as follows: "[T]he hearing . . . was for the 
purpose of determining issues of fact concerning, in this case, the [petitioners'] 
purpose and entitlement to inspect [the corporation's] corporate records, which 
was the very basis of their petition. The hearing therefore constituted a trial 
within the meaning of Trial Rule 43(A)."*^^ 

Therefore, the court ruled, "testimony was required to be taken in open court 
in order to preserve [the corporation' s] rights to cross-examination and the ability 
of the fact-finder to observe demeanor and determine credibility." ^"^^ The court 
proceeded to analyze the trial court's finding of a "proper purpose" and 
concluded that the trial court improperly relied on the affidavit. ^"^^ In reversing 
the trial court's ruling, the court of appeals explained "we are reluctant to 
endorse the trial court's findings of fact and conclusions thereon as somehow 
demonstrative of a proper purpose when there was no testimony or properly- 
admitted evidence establishing it."^^° 

V. Joint Ventures 

In Lauth Indiana Resort & Casino, LLC v. Lost River Development, LLC,^^^ 
the Indiana Court of Appeals held, as a matter of first impression, as follows: 

[I]f a joint venture is formed for the purpose of submitting a proposal or 

142. Id. 

143. Id. at 3 (quoting IND. CODE § 23-l-52-2(a), (c) (2007)). 

144. Id. 

145. Id. 

146. Id. at 4 (quoting iND. TRIAL R. 43(A)). 

147. Id. at 5 (citations omitted). 

148. Id. 

149. Id. 

150. /^. at6. 

151. 889 N.E.2d 915 (Ind. Ct. App. 2008). 


similar bid, and the joint venture agreement is silent as to when or under 
what circumstances the joint venture will end, then the joint venture 
ends, as a matter of law, when the proposal or bid is rejected. ^^^ 

In March 2004, the Indiana Gaming Commission (IGC) issued a request for 
proposals (RFP), soliciting proposals from those wishing to develop a casino 
project in Orange County. ^^^ Three groups submitted proposals: Trump Indiana, 
Orange County Development, and Lost River Development. ^^'^ After Lost River 
submitted its original proposal, it was contacted by Lauth Indiana Resort & 
Casino, LLC (Lauth), which expressed a desire to become involved with the Lost 
River proposal. ^^^ The Lost River members and Lauth entered into a "Letter 
Agreement," providing for the parties' ownership interests in Lost River. The 
parties agreed that the Letter Agreement created a "joint venture."^^^ "However, 
the Letter Agreement was silent as to when, or under what circumstances, the 
joint venture would end."^^^ Lost River submitted an amended proposal to the 
IGC.^^^ Ultimately, however, the IGC selected the Trump Indiana proposal. ^^^ 

The parties were hopeful that Trump Indiana would be unable to meet the 
financing or other conditions imposed by the IGC.^^° Meanwhile, Lauth began 
contacting other gaming companies regarding the possibility of teaming up if the 
IGC rescinded its award to Trump Indiana. ^^^ As expected. Trump Indiana was 
unable to meet the IGC's conditions and the IGC issued a second RFP.^^^ Lauth 
submitted a proposal with another company. Cook Group, under the name of 
Blue Sky Casino, LLC (Blue Sky), in competition with Lost River. '^^ The IGC 
awarded the development to Blue Sky.^^'^ 

Lost River filed suit against Lauth and others, alleging breach of the Letter 
Agreement, in addition to breach of fiduciary duty claims. ^^^ Lauth moved for 
summary judgment, arguing that the Letter Agreement formed a joint venture, 
which terminated when the IGC chose Trump Indiana's proposal. '^^ The trial 
court denied Lauth' s summary judgment motion, and Lauth appealed. '^^ 

152. /J. at 922-23. 

153. Mat 916. 

154. Id. 

155. Id. at 911. 

156. Id. 

157. Id. 

158. Id. 

159. Id. 

160. Id. 

161. Id. 

162. /J. at 917-18. 

163. /J. at 918. 

164. Id. 

165. Id. 

166. Id. 

167. /J. at 919. 

862 INDIANA LAW REVIEW [Vol. 42:847 

As an initial matter, the court in Lauth ruled, as a matter of first impression 
in Indiana, that "a joint venture without a termination date remains in force until 
its purpose is accomplished or that purpose becomes impracticable." ^^^ The court 
proceeded to evaluate the "purpose" of the Lost River joint venture, starting with 
the definition of joint venture: "[A] joint venture is an association of two or 
more parties formed to carry out a single business enterprise for profit. A joint 
venture is similar to a partnership except that a joint venture contemplates only 
a single transaction ''^^^ The court then looked to the express language of the 
"Letter Agreement," concluding that "the joint venture contemplated only one 
proposal and [it] is silent with regard to what would happen if the Lost River 
proposal was not chosen by the IGC."^^^ The court ruled that "once the IGC 
rejected the Lost River proposal, the joint venture terminated, and the parties 
were then free to pursue other opportunities, either with each other or with other 
parties."^^^ As such, the court found, "Lauth did not breach the joint venture 
agreement or violate any duty owed to the other parties to the joint venture." ^^^ 
The court emphasized that its "holding applies only in cases where, as here, the 
joint venture agreement is silent as to when the joint venture terminates."^^^ 

VI. Business Torts and Statutory "Crimes" 

A. Tortious Interference with Contract 

In Allison v. Union Hospital, Inc.,^^^ the court evaluated the "justification" 
element for a tortious interference with a contractual relationship claim. ^^^ The 
plaintiffs in Allison — Certified Registered Nurse Anesthetists — worked for a 
hospital providing obstetric anesthesia services. ^^^ The plaintiffs and hospital 
were engaged in contract renegotiations while the hospital was attempting to 
negotiate an agreement with a professional corporation to replace the plaintiffs 
in providing obstetric anesthesia services for the hospital. ^^^ The original 

168. Mat 920. 

169. Id. (citations omitted); see also Walker v. Martin, 887 N.E.2d 125, 138 (Ind. Ct. App. 
2008). The court in Walker explained that for a joint venture to exist, "the parties must be bound 
by an express or implied contract providing for ( 1 ) a community of interests, and (2) joint or mutual 
control, that is, an equal right to direct and govern the undertaking, that binds the parties to such 
an agreement." Id. "A joint venture agreement must also provide for the sharing of profits." Id. 

170. Lauth, 889 N.E.2d at 920. The court in Lauth recognized that its holding established a 
"bright-line rule[,]" but believed that approach to be "particularly appropriate for dealing with joint 
ventures, which by their very nature contemplate only a single transaction." Id. at 922. 

171. Mat 921. 

172. Id. 

173. Mat 922. 

174. 883 N.E.2d 113 (Ind. Ct. App. 2008). 

175. Mat 118-22. 

176. M. at 115. 

177. M. at 116-17. 


agreement with the plaintiffs contained a provision for termination without 
cause. '^^ Before the agreement with the professional corporation was finalized, 
however, the hospital reached an agreement with the plaintiffs. ^^^ The new 
agreement did not contain a termination without cause provision. ^^^ 

The hospital informed the professional corporation that the agreement with 
plaintiffs could, in fact, be terminated without cause subject to ninety days 
notice.'^* After terms were agreed upon with the professional corporation, the 
hospital provided notice of termination to the plaintiffs. ^^^ When plaintiffs 
demanded a copy of their contract, the hospital produced an altered version with 
a new termination without cause provision. ^^^ The hospital and professional 
corporation finalized their agreement, and plaintiffs sued both of them — alleging 
breach of contract, tortious interference with a contractual relationship, and other 
causes of action. ^^"^ 

To establish a claim of tortious interference with a contractual relationship, 
a plaintiff must prove the following five elements: "(1) the existence of a valid 
and enforceable contract; (2) the defendant's knowledge of the existence of the 
contract; (3) the defendant' s intentional inducement of the breach of contract; (4) 
the absence of justification; and (5) damages resulting from the defendant's 
wrongful inducement of the breach."^^^ To determine whether a defendant's 
conduct is "justified," the Indiana Supreme Court has suggested that courts look 
to the factors enumerated in the Restatement (Second) of Torts, which are as 

(a) the nature of the defendant's conduct; 

(b) the defendant's motive; 

(c) the interests of the plaintiff with which the defendant's conduct 

(d) the interests sought to be advanced by the defendant; 

(e) the social interests in protecting the freedom of action of the 
defendant and the contractual interests of the plaintiff; 

(f) the proximity or remoteness of the defendant's conduct to the 
interference; and 

(g) the relations between the parties. ^^^ 

The court in Allison explained that "the weight to be given to each consideration 
may differ from case to case depending on the factual circumstances, but the 

178. /^. at 115. 

179. Mat 116. 

180. Id. 

181. Matin. 

182. M. at 116-17. 

183. M. at 116. 

184. Mat 117. 

185. Id. at 118 (citing Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228, 1235 (Ind. 

186. Id. (quoting Winkler, 638 N.E.2d at 1235). 

864 INDIANA LAW REVIEW [Vol. 42:847 

overriding question is whether the defendants' conduct has been fair and 
reasonable under the circumstances T^^^ 

Regarding the hospital, ^^^ the court found that there was ''at the least ... a 
question of material fact as to whether [the hospital's] actions with respect to the 
contents of the [agreement with plaintiffs] was justified."^^^ The court found it 
significant that the hospital discovered that the contract did not contain a 
termination without cause provision; the hospital failed to discuss that omission 
with the plaintiffs; it terminated the contract pursuant to a nonexistent provision; 
and then it inserted the provision into an altered version, which it delivered to the 
plaintiffs following termination. '^^ The court proceeded to analyze the remaining 
Restatement factors, concluding that the inquiry regarding "whether [the 
hospital's] conduct has been fair and reasonable under the circumstances . . . [is] 
so highly fact sensitive that ... it is best answered by a factfinder." ^^^ 

Regarding the professional corporation, the court found that its conduct was 
justified. ^^^ The court explained that the professional corporation's conduct was 
"limited to agreeing to be a replacement provider of [obstetric] anesthesia 
services." ^^^ Further, the hospital told the professional corporation that the 
plaintiffs' contract was terminable at will.^^^ After evaluating the remaining 
factors enumerated by the Restatement, the court concluded that "[u]nder these 
circumstances, [the professional corporation's] actions were justified." ^^^ 

B. Trade Secrets 

In Bridgestone Americas Holding, Inc. v. Mayberry,^^^ the Indiana Supreme 
Court held, as a matter of first impression, that the federal courts' long-standing 
three-part balancing test was "the proper analysis for whether 'good cause' has 
been shown and whether a protective order should be issued for a trade secret 
during discovery." ^^^ Before analyzing and, ultimately, adopting the three-part 
balancing test for analysis of the protective order issue, the court provided a 
concise "history" of trade secret protection in Indiana, including the following 

187. Id. 

188. The court explained that "[a]lthough it is true that a party to a contract is not subject to 
liability for tortious interference with its own contract if it acts alone, it may be subject to liability 
for conspiring with another party to tortiously interefere with the contract." Id. (quoting Winkler, 

189. Id. at 120 (emphasis in original). 

190. /J. at 119-20. 

191. Id. Sit 121. 

192. Id. 

193. Id. at 122. 

194. Id. 

195. Id. 

196. 878 N.E.2d 189 (Ind. 2007). 

197. Id. Sit 194. 


Trade secrets are unique creatures of the law, not property in the 
ordinary sense, but historically receiving protection as such. Unlike 
other assets, the value of a trade secret hinges on its secrecy. As more 
people or organizations learn the secret, the value quickly diminishes. 
For this reason, owners or inventors go to great lengths to protect their 
trade secrets from dissemination. 

This Court has long recognized the importance of protecting trade 
secrets from inappropriate disclosure. Most trade secret litigation in 
Indiana has involved allegations of overt misappropriation. Of course, 
trade secrets may be valuable during the course of litigation not 
involving misappropriation claims, and there are moments when justice 
requires disclosure. Still, courts must proceed with care when 
supervising the discovery of trade secrets, lest the judiciary be used to 
achieve misappropriation or mere leverage. ^^^ 

The court proceeded to adopt the three-part balancing test followed by 
federal courts, *^^ and concluded that the parties seeking disclosure failed to meet 
their burden for showing necessity.^^° 

C Indiana 's Corrupt Business Influence Act 

I. ''Direction " or ''Control " of Racketeering Activities Not Required. — In 
Keesling v. Beegle^^^ the Indiana Supreme Court concluded that Indiana's 
Corrupt Business Influence Act — i.e., Indiana's version of the federal Racketeer 
Influenced and Corrupt Organizations Act — "imposes RICO liability both on 
persons at and below a racketeering enterprise's managerial or supervisory 
level."^^^ The plaintiffs in Keesling purchased pay telephones and "entered into 

198. Id. at 192-93 (citations omitted). 

199. Id. at 193-94. The court described the three-part test as follows: 

First, the party opposing discovery must show that the information sought is a "trade 
secret or other confidential research, development, or commercial information" and that 
disclosure would be harmful. . . . Then the burden shifts to the party seeking discovery 
to show that the information is relevant and necessary to bring the matter to trial. If 
both parties satisfy their burden, the court must weigh the potential harm of disclosure 
against the need for the information in reaching a decision. 
Id. at 193 (quoting FED. R. Crv. PRO. 26(c)(7)) (other citations omitted)). 

200. Id. at 1 97. A more thorough discussion of the application of the three-part balancing test 
as applied to the facts in Mayberry is included in this year's Indiana civil procedure survey. See 
Daniel K. Burke, Recent Developments in Indiana Civil Procedure, 42 IND. L. REV. 879, 882-83 

201. 880 N.E.2d 1202 (Ind. 2008). 

202. Id. at 1203 (emphasis added). 

866 INDIANA LAW REVIEW [Vol. 42:847 

service agreements to install, service and maintain the telephones. "^°^ The 
plaintiffs were passive investors in the program. ^^"^ The promoters of the program 
"violated federal securities laws by not registering the pay telephone investment 
program with the Securities and Exchange Commission."^^^ 

The defendants in Keesling included not only the "promoters," but also the 
recruited sales representatives and the individuals and entities that had entered 
agreements with the promoters, "to recruit sales representatives and receive 
commissions on the sales made by his recruits."^^^ The plaintiffs sued the 
defendants for their respective roles in the pay telephone program, alleging 
violations of Indiana' s Securities Act, Indiana' s RICO Act, fraud, conversion and 

The plaintiffs contended that these "recruiters" and "recruits" violated the 
Indiana RICO Act by "conduct[ing] or otherwise participat[ing] in the activities 
of [an] enterprise through a pattern of racketeering activity."^^^ The trial court 
rejected the contention and granted summary judgment in favor of the 
defendants, based on the 2000 Indiana Court of Appeals' decision in Yoder 
Grain, Inc. v. Antalis,^^^ in which the court of appeals held that "the plaintiff 
must allege that the defendant 'participated in the operation or management of 
the enterprise itself,' and that the defendant played 'some part in directing the 
enterprise's affairs. '"^^^ According to the court in Yoder Grain, "mere 
participation in the activities of the enterprise is insufficient; the defendant must 
participate in the operation or management of the enterprise."^* ^ The trial court 
found that the plaintiffs failed to present evidence that the defendants "directed" 
the activities of the enterprise and, as such, granted summary judgment in the 
defendants' favor.^*^ 

On transfer, the Indiana Supreme Court abrogated the Yoder Grain decision 
and reversed the trial court's summary judgment ruling, holding that a defendant 
need not "direct" or "control" the racketeering activities in order to face liability 
under Indiana's RICO Act.^*^ The Indiana Supreme court explained that '"the 
Legislature intended for the Indiana Act to reach persons below the managerial 
or supervisory level as well as those who exert control or direction over the 
affairs of [a racketeering] enterprise, i.e., to reach a racketeering enterprises 'foot 

203. Id. 

204. Id. 

205. Id. 

206. Id. at 1204. 

207. Id. 

208. Id. at 1205-06 (quoting IND. Code § 35-45-6-2(3) (2008)). 

209. 722 N.E.2d 840 (Ind. Ct. App. 2000). 

210. Keesling, 880 N.E.2d at 1205 (quoting Yoder Grain, 722 N.E.2d at 846). 

211. Yoder Grain, 722 N.E.2d at 846 (quoting Goren v. New Vision Int'l, Inc., 156 F.3d 721, 
727(7thCir. 1998)). 

212. Keesling, 880 N.E.2d at 1205. 

213. Id. 


soldiers' as well as its 'generals. '"^^"^ In reaching its holding, the court in 
Keesling analyzed the language of the federal RICO statute compared to that of 
the Indiana Act, finding that the Indiana Act was phrased more "broadly," and 
it surveyed the laws of other states.^'^ The court stated that "[b]ecause we hold 
that the level of participation necessary to implicate the Indiana Act need not rise 
to the level of direction, such a showing was unnecessary and summary judgment 
was not justified on that basis. "^^^ 

2. Indiana 's RICO Act Not Preempted by lUTSA. — In AGS Capital Corp. v. 
Product Action International, LLC,^^^ the court held, as a matter of first 
impression in Indiana, that the Indiana Uniform Trade Secrets Act (lUTS A) does 
not preempt Indiana's RICO Act.^^^ AGS involved claims by Product Action 
against its former employees, a competing company, and that company' s "parent" 
company (under "alter ego" theory),^^^ alleging, among other things, 
misappropriation of trade secrets, violation of Indiana's RICO Act. The 
defendants argued that the lUTSA preempts Product Action under Indiana's 
RICO Act.220 

In concluding that the lUTSA does not preempt the civil remedy provisions 
of Indiana's RICO Act, the court in AGS explained as follows: 

Because the RICO statute was designed to address the more sinister 
forms of corruption and criminal activity, the preemption provision of 
lUTSA should not prohibit RICO from fulfilling its purpose where the 
form of corruption involves the systematic acquisition of economically 
valuable information through the artifice of competitors' employees in 
order to gain an unlawful economic advantage in the marketplace. RICO 
is structured to reach and punish these diabolical operations that are a 
greater threat to society than random theft. ^^^ 

The court continued, "In consideration of the purpose and goals of the entire 
RICO framework, we conclude that the civil remedy portion providing for a 
private action is a derivative of the criminal law. Thus, this type of action is not 
preempted by lUTSA."^^^ The court was hopeful that its "conclusion will result 

214. Id. at 1206 (internal quotations omitted). 

215. Id. at 1205-08. 

216. /^. at 1208. 

217. 884 N.E.2d 294 (Ind. Ct. App. 2008). 

218. Id. at 30S. 

219. See id. at3l\-\2 (concluding that the parent and subsidiary companies were "alter egos," 
premised in large part on the parent's use of a "sister" company to pose as a potential customer of 
Product Action in order to obtain a price quotation and then provide that information to the 
subsidiary competitor). 

220. Id. at 306. The lUTSA provides that it "displaces all conflicting law of this state 
pertaining to the misappropriation of trade secrets, except contract law and criminal law." Id. 
(quoting iND. CODE § 24-2-3- 1(c) (2007)). 

221. Mat 308. 

222. Id. 

868 INDIANA LAW REVIEW [Vol. 42:847 

in a greater disincentive for the commission of the strategic, repetitious theft of 
trade secrets."^^^ 

D. Fraud on a Financial Institution 

In American Heritage Banco, Inc. v. McNaughton,^^^ the court held that a 
plaintiff alleging "fraud on a financial institution" need not prove the elements 
of common law fraud.^^^ Fraud on a financial institution is defined as follows: 

A person who knowingly executes, or attempts to execute, a scheme or 
artifice ... to obtain any of the money, funds, credits, assets, securities, 
or other property owned by or under the custody or control of a state or 
federally chartered or federally insured financial institution by means of 
false or fraudulent pretenses, representations, or promises commits a 
Class C felony.226 

The defendants in American Heritage argued that the plaintiff must prove "the 
elements of common law fraud [including, specifically, "reliance"] in order to 
prove a violation of this statute."^^^ The court disagreed, explaining that "[i]n 
Indiana no common-law crimes exist, and the legislature fixes the elements 
necessary for any statutory crime."^^^ According to the court, "[c]riminal statutes 
cannot be enlarged by construction, implication, or intendment beyond the fair 
meaning of the language used."^^^ 

vn. Non-Competition Covenants 

A. Public Policy and Geographic Scope 

In Central Indiana Podiatry, P.C. v. Krueger,^^^ a podiatrist had been 
employed with the plaintiff pursuant to a series of written employment 
agreements, which were "renewed" every year or two.^^^ Each agreement 

223. Id. 

224. 879 N.E.2d 1 1 10 (Ind. Ct. App. 2008). 

225. Mat 1117-18. 

226. M. at 1 1 17 (quoting iND. CODE § 35-43-5-8(a)(2) (2008)). 

227. Id. at nil nA. 

228. Id. at 1 1 17 (quoting Knotts v. State, 187 N.E.2d 571, 573 (Ind. 1963)). 

229. Id. The court in American Heritage also addressed the plaintiffs common law fraud 
claim, addressing the rule that fraud cannot be premised on "representations of ftiture conduct, on 
broken premises, or on representations of existing intent that are not executed." Id. at 1115. The 
plaintiff in American Heritage based its common law fraud claim, in part, on the defendant's loan 
application, which included a statement regarding the "purpose" of the loan. The plaintiff alleged 
that the stated purpose was not the "true" purpose. The court affirmed the trial court's dismissal 
of the claim, explaining that the "stated purpose of the loan is not a statement of past or existing 
fact." Mat 1116. 

230. 882 N.E.2d 723 (Ind. 2008). 

231. Mat 725. 


contained non-solicitation and non-competition provisions, with terms of two 
years from the date of termination and geographic scopes "defined as fourteen 
listed central Indiana counties, as well as any other county where [plaintiff] 
maintained an office during the term of the Contract or in any county adjacent to 
any of the foregoing counties."^^^ Significantly, the podiatrist had not practiced 
in Hamilton County within 2 years of his termination. ^^^ 

In 2005, the podiatrist was accused of attempting to kiss an office employee 
at the office.^^"^ The plaintiff terminated him on July 25, 2005.^^^ In September 
2005, the podiatrist entered an employment agreement with a competing 
company in Hamilton County, which was one of the counties specifically listed 
in the employment agreement with the plaintiff.^^^ Further, the podiatrist sent a 
letter to the plaintiffs patients, informing them of his new employment.^^^ The 
plaintiff sued for injunctive relief and damages, the trial court found the 
geographic restriction unenforceable, and denied the injunction.^^^ The court of 
appeals reversed,^^^ and the Indiana Supreme Court granted transfer.^'^^ 

As an initial matter, the court in Krueger described the "public policy" 
concerns implicated by non-competition agreements involving physicians, as 

Noncompetition agreements are justified because they protect the 
investment and goodwill of the employer. In many businesses, the 
enforceability of a noncompetition agreement affects only the interests 
of the employee and employer. A noncompetition agreement by a 
physician involves other considerations as well. Unlike customers of 
many businesses, patients typically come to the physician's office and 
have direct contact with the physician. If an agreement forces a 
physician to relocate outside the geographic area of the physician's 
practice, the patients' legitimate interest in selecting the physician of 
their choice is impaired. Moreover, the confidence of a patient in the 
physician is typically an important factor in the relationship that 
relocation would displace.^"^^ 

Nevertheless, after reviewing case law and legislation from other states, as 
well as an ethics opinion from the American Medical Association, the Indiana 
Supreme Court held that non-competition agreements involving physicians were 

232. Id. at 725-26 (internal quotations omitted). 

233. Mat 730. 

234. Id. 2X125. 

235. Id. 

236. Id. 

237. Id. 

238. Id. 

239. Id. (citing Cent. Ind. Podiatry, P.C. v. Krueger, 859 N.E.2d 686, 689 (Ind. Ct. App. 

240. Id. 

241. /^. at 727. 

870 INDIANA LAW REVIEW [Vol. 42:847 

not unenforceable as a matter of public policy. ^"^^ The court upheld its 1983 
ruling in Raymundo v. Hammond Clinic Ass 'n,^^^ in which it rejected a claim that 
such covenants were unenforceable on public policy grounds and "adopted a 
reasonableness standard for physician noncompetition agreements. "^'^'^ The court 
concluded that "[a]ny decision to ban physician noncompetition agreements 
altogether should be left to the legislature."^"^^ 

After finding that the plaintiff had demonstrated that the non-competition 
agreement "served the legitimate interest of preserving patient relationships 
developed with [plaintiffs] resources and to that extent served a legitimate 
interest of [the plaintiff], "^"^^ the court proceeded to evaluate the reasonableness 
of the geographic restriction.^"^^ The court explained that "[w]hether a geographic 
scope is reasonable depends on the interest of the employer that the restriction 
serves."^"^^ According to the court, "[a]n employer has invested in creating its 
physician's patient relationships only where the physician has practiced."^"^^ 
Further, "noncompetition agreements justified by the employer's development 
of patient relationships must be limited to the area in which the physician has had 
patient contact."^^^ 

Because the podiatrist had not used the plaintiffs resources to establish 
patient relationships throughout all of the counties either identified by name or 
description in the agreement, the court in Krueger found that the geographic 
scope was "clearly overbroad."^^^ However, the court applied the "blue pencil" 
doctrine in an effort to determine whether enforceable aspects of the non- 
compete were being violated.^^^ The court started with the fact that the plaintiff 
defined its geographic scope in terms of counties, rather than the radius from the 
locations of the "workplace," and then considered that the duration of the non- 
compete was two years. ^^^ The court explained "when the [two year] period 

242. Id. at 728. 

243. 449 N.E.2d 276 (Ind. 1983). 

244. Krueger, 882 N.E.2d at 728 (citing Raymundo, 449 N.E.2d at 280-81). 

245. Id. 

246. Id. 2X129. 

247. Id. The parties had agreed that the two-year duration of the agreement was reasonable. 


248. Id. at 730. 

249. Id. 

250. Id. 

251. Id. 

252. Id. at 730-3 1 . The court described the "blue pencil" doctrine as follows: 

If a noncompetition agreement is overbroad and it is feasible to strike the unreasonable 
portions and leave only reasonable portions, the court may apply the blue pencil 
doctrine to permit enforcement of the reasonable portions. The blue pencil doctrine 
permits excising language but not rewriting the agreement. 
Id. (internal citations omitted). 

253. Mat 730-31. 


begins to run varies with when [the podiatrist] left that location. "^^"^ The court 
found that the plaintiff established only that the podiatrist worked in "three 
counties — Marion, Tippecanoe and Howard — within the 2-years preceding his 
termination." ^^^ Because those counties were specifically identified in the non- 
compete, the geographic scope was "sustainable as to them."^^^ 

However, the court concluded that the "geographic scope [was] unreasonable 
to the extent it reache[d] contiguous counties. "^^^ The court explained that parts 
of the contiguous counties were too far from the locations at which the podiatrist 
actually worked.^^^ In other words, the selection of entire counties as the basis 
for the geographic restriction rendered the restriction unreasonable, because no 
evidence was offered to suggest that a "significant contingent of patients" 
traveled from more remote parts of even the adjacent counties.^^^ The court, 
therefore, held that the "contiguous county restriction [was] unreasonable [,]"^^^ 
but that the restriction was enforceable as to Marion, Tippecanoe, and Howard 

B. ''Protectible Interest" in Customer Relationships 

In Gleeson v. Preferred Sourcing, LLC,^^^ the court of appeals evaluated 
whether a plaintiff-employer had a "protectible interest" in its "customer 
relationships. "^^^ In Gleeson, the plaintiff employed the defendant as the "sales 
manager" at its Fort Wayne location.^^"^ The defendant and Preferred entered into 
a non-competition and confidentiality agreement. ^^^ The defendant was 
"instrumental in growing [plaintiffs] Fort Wayne location from a new, start-up 
facility ... to one of its more profitable facilities."^^^ According to the plaintiff, 
"customer relationships are 'key' to [its] success."^^^ The defendant-employee 
resigned in January 2005.^^^ In February 2005, the defendant began working for 

254. /J. at 731. 

255. Id. 

256. Id. 

257. Id. 

258. Id. 

259. Id. 

260. Id. 

261. Id. The court in Krueger affirmed the trial court's order denying plaintiffs request for 
a preliminary injunction, except as to the three Indiana counties for which the non-compete was 
found enforceable. Id. at 734. 

262. 883 N.E.2d 164 (Ind. Ct. App. 2008). 

263. Id. at 172-74. 

264. Id. at 169. 

265. Id. 

266. Id. at 170. 

267. Id. 

268. Id. 

872 INDIANA LAW REVIEW [Vol. 42:847 

a competitor, soliciting sales and contacting customers of the plaintiff. ^^^ The 
plaintiff-employer filed its complaint, seeking damages and a permanent 
injunction, followed by a motion for preliminary injunction.^^^ The trial court 
granted the preliminary injunction and the defendant appealed.^^^ 

In connection with a dispute regarding the enforceability of a non- 
competition agreement, the court must "first examine whether the employer has 
asserted a legitimate interest that may be protected by a covenant."^^^ Indiana 
courts "recognize[] a protectable interest in the good will generated between a 
customer and a business."^^^ The court in Gleeson explained that "[g]ood will 
includes secret or confidential information such as the names and addresses of 
customers and the advantage acquired through representative contact."^^"^ The 
court explained the rationale for finding a "protectible interest" in customer 
relationships, as follows: 

In industries where personal contact between the employee and the 
customer is especially important due to the similarity in the product 
offered by the competitors, the advantage acquired through the 
employee's representative contact with the customer is part of the 
employer's good will, regardless of whether the employee had access to 
confidential information.^^^ 

The court in Gleeson continued, as follows: 

If an employee is hired in order to generate such good will, she may be 
enjoined from subsequently contacting those customers or using that 
good will to her advantage. Indeed, Indiana courts have held that a 
salesperson may be restrained from contacting former customers within 
her previous sales area. There is a personal nature to the relationship 
between a salesperson and customer, and many times the customer's 
only contact with the company is through the salesperson.^^^ 

In Gleeson, the court concluded that the plaintiff's "customer relationships 
and good will [could] be protected by a covenant not to compete[,]"^^^ because 
"customer relationships are important in [the] business, which is a 'people 
business,' and . . . [the defendant] 'was one of [plaintiffs] most successful sales 
associates in creating those relationships with [plaintiff's] customers. '"^^^ 

269. Id. 

270. Id. 

111. Id. at 110-71. 

272. Id. at 172 (citing Cent. Ind. Podiatry, P.C. v. Krueger, 882 N.E.2d 723, 728 (Ind. 2008)). 

273. Id. at 173 (quoting Norlund v. Faust, 675 N.E.2d 1 142, 1 154 (Ind. Ct. App. 1997)). 

274. Id. 

275. Id. (citing MacGill v. Reid, 850 N.E.2d 926, 930 (Ind. Ct. App. 2006)). 

276. Id. (citations omitted). 

277. Id. at 114. 

278. /^. at 173-74. 


Vin. Contract Interpretation 

A. ''Contemporaneous Document'' Rule 

In Murat v. South Bend Lodge No. 235,^'^^ the court held that the 
"contemporaneous document" rule did not apply to the construction of two 
allegedly contemporaneously executed deeds — one of which contained a specific 
width to an easement and the other of which did not.^^^ In Murat, the dominant 
estate brought an action for injunctive relief to prevent the servient estate owner 
and billboard company from placing a billboard within an easement area.^^^ The 
subject property had been conveyed subject to a retained easement of unspecified 
width. The same day as the original conveyance, the retained easement holders 
conveyed the easement to their daughter and son-in-law, specifying a twenty- 
three-foot width to the conveyed easement. ^^^ Later, the property owner 
attempted to place a billboard on a portion of the property.^^^ The easement 
holders sought an injunction preventing placement of the billboard. The trial 
court denied the injunction, concluding that placement of the billboard along the 
side of the property would "afford necessary or reasonable ingress and egress. "^^'^ 
The court declined to read the two deeds together to impose a twenty -three-foot 
width to the original retained easement.^^^ 

In affirming the trial court's ruling, the court of appeals described the 
"contemporaneous document" rule as follows: "'[I]n the absence of anything to 
indicate a contrary intention, writings executed at the same time and relating to 
the same transaction will be construed together in determining the contract. The 
application of this rule depends on the facts of each particular case."^^^ 

The court in Murat explained that "the doctrine should be applied cautiously 
when the documents involve different parties."^^^ The court held that the two 
deeds should not be read together to impose a deed of specific width on the 
property owner.^^^ The original deed conveying the property did not specify a 
width to the retained easement and the current easement holders pointed to no 
evidence indicating that the property owner "understood the transaction to 
involve an easement of a specific width."^^^ The court of appeals, therefore, 
affirmed the trial court's ruling denying the requested injunction.^^^ 

279. 893 N.E.2d 753 (Ind. Ct. App. 2008). 

280. /J. at 757-58. 

281. Id. at 155. 

282. Id. at 754. 

283. Id. at 755. 

284. See id. at 756. 

285. Id. at 757-58. 

286. Id. (internal quotations omitted). 

287. Id. at 757. 

288. Id. 

289. Id. 

290. /J. at 757-58. 

874 INDIANA LAW REVIEW [Vol. 42:847 

B. Handwriting Controls Over Print or Typewriting 

In Patel v. United Inns, Inc.,^^^ the court of appeals applied the rule that 
"[w]hen construing a contract where there is apparent conflict, handwriting 
prevails over typewriting."^^^ The court explained the rationale for this rule as 
follows: "Handwritten terms are favored over typewritten terms because there is 
a presumption that the handwritten terms were more actively negotiated between 
the parties, and, therefore, that those terms best reflect the parties' intent."^^^ The 
court in Patel relied on this rule in charging a party to a purchase agreement with 
an escrow obligation of $530,000, which had been hand- written onto the 
contract, as opposed to an escrow obligation of 10% of the purchase price. ^^"^ 
The court recognized that $530,000 was closer to 25% of the purchase price, but 
found dispositive that the $530,000, amount was hand- written into the contract.^^^ 
The court held that the party obligated to pay the escrow amount had breached 
the contract, because he failed to pay the full $530,000 escrow amount.^^^ 

IX. Contract Performance and Breach 

A. Standing to Allege Breach 

1. Third-Party Standing to Argue ''First Material Breach. " — In Harold 
McComb & Son, Inc. v. JPMorgan Chase Bank,^^^ the court held that a 
mechanic' s lien holder lacked standing to sue on a mortgagee-bank' s alleged first 
material breach of a contract between the bank and the mortgagor-borrower.^^^ 
The mechanic's lien holder and bank had filed separate foreclosure actions, 
which were consolidated.^^^ The trial court ordered foreclosure of the bank's 
mortgages and ordered the sale of the subject property.^^^ On appeal, the 
mechanic's lien holder argued that the trial court erred in foreclosing on the 
bank's mortgages, because the bank was in first material breach of the loan 
agreement between the bank and the mortgagor-borrower.^^^ 

291. 887 N.E.2d 139 (Ind. Ct. App. 2008). 

292. Id. at 148 (citing Scott v. Anderson Newspapers, Inc., 477 N.E.2d 553, 562 (Ind. Ct. App. 

293. /J. atl49n.3. 

294. Id. at 148. 

295. Id. 

296. /^. at 148-49. 

297. 892 N.E.2d 1255 (Ind. Ct. App. 2008). 

298. /rf. at 1258. 

299. Mat 1256-57. 

300. Mat 1257. 

301. Id. at 1258; see also Wilson v. Lincoln Fed. Sav. Bank, 790 N.E.2d 1042, 1048 (Ind. Ct. 
App. 2003) (stating that "where a party is in material breach of a contract, he may not maintain an 
action against the other party or seek to enforce the contract against the other party if that party later 
breaches the contract"). 


The court in J P Morgan rejected the Uen holder's argument, concluding that 
the lien holder had "no legal standing to complain."^^^ Quoting the United States 
Supreme Court's decision in Williams v. Eggleston,^^^ the court in JPMorgan 
explained that "[t]he parties to a contract are the ones to complain of a breach, 
and if they are satisfied with the disposition which has been made of it and of all 
claims under it, a third party has no right to insist that it has been broken.''^^"^ The 
court in JPMorgan continued, explaining that "only the parties to a contract, 
those in privity with the parties, and intended third-party beneficiaries under the 
contract may seek to enforce the contract."^^^ Concluding that the mechanic's 
lien holder was none of those, the court affirmed the trial court's ruling that the 
lien holder lacked standing to assert the bank's alleged breach in opposition to 
its foreclosure action.^^^ 

2. Members of LLC Lacked Standing to Sue for Damage to LLC. — In Vectren 
Energy Marketing & Service v. Executive Risk Specialty Insurance Co.,^^^ the 
court held that members of a limited liability company lacked standing to sue 
their (and the LLC's) liability insurance carrier for breach of contract and 
declaratory relief in connection with the insurer's alleged failure to pay a 
judgment entered against the LLC and its employ ees.^^^ The court reviewed the 
subject policy and concluded that the members were individual insureds covered 
by the policy.^^^ However, the court noted that neither of the members were 
named defendants in the underlying lawsuit, neither member attempted to 
intervene in the lawsuit, no judgment was entered against the members, and 
neither member incurred any defense costs in connection with the lawsuit.^ ^° 

The court in Vectren explained that "[t]o establish standing, the plaintiff 
must demonstrate a personal stake in the outcome of the lawsuit and must show 
that he or she has sustained or was in immediate danger of sustaining, some 
direct injury as a result of the conduct at issue."^^^ The court acknowledged that 
the members were covered by the policy and that, as such, the insurer owed them 
"contractual duties . . . that are separate and distinct from those duties owed to 
[the LLC] ."^^^ However, the court found that the contractual duties at issue in the 
case were owed only to the LLC. It stated that "[i]t may be that as the two 
members of [the LLC], the [members] will lose money as an indirect 
consequence of the judgment, defense expenses, and [the insurer's] refusal to 
pay. That reality, however, does not mean that they have suffered a "Loss" under 

302. JPMorgan, 892 N.E.2d at 1258. 

303. 170 U.S. 304(1898). 

304. JPMorgan, 892 N.E.2d at 1258. 

305. Id. 

306. Id. 

307. 875 N.E.2d 774 (Ind. Ct. App. 2007). 

308. Id. at 778-79. 

309. Id at 775. 

310. /J. at 776. 

311. Id. at 111 (citing Shourek v. Stirling, 621 N.E.2d 1 107, 1 109 (Ind. 1993)). 

312. Id. 

876 INDIANA LAW REVIEW [Vol. 42:847 

the Policy."^ ^^ The court concluded that the members were *'not entitled to 
attempt to right a wrong allegedly done to a separate and distinct entity."^ ^"^ 

B. Third-Party Beneficiaries 

In City of East Chicago v. East Chicago Second Century, Inc.,^^^ the court 
discussed third-party beneficiary theory and ruled that two non-profit foundations 
and a for-profit corporation were intended third-party beneficiaries of two "letter 
agreements" between the City of East Chicago and a marina partnership, relating 
to a license to operate a riverboat casino that provided for the payment of a 
percentage of gross receipts to the foundations and the corporation.^*^ 
Specifically, the award of a license to the marina partnership was conditioned on 
the partnership's agreement to fund local economic development through 
payment of 3.75% of its gross receipts to the foundations and the corporation.^*^ 
The license was transferred to Harrah's, then later, to "Resorts East Chicago."^*^ 
The letter agreements were not addressed in the documents transferring the 
license from Harrah's to Resorts. ^*^ 

Subsequently, the East Chicago Common Counsel passed an ordinance 
purporting to redirect the amounts being paid under the letter agreements to the 
City of East Chicago.^^^ The corporation filed suit against Resorts, seeking a 
declaration that it was a third-party beneficiary entitled to enforce the terms of 
the letter agreements. ^^* Resorts filed a third-party complaint against the 
foundations and the City of East Chicago. ^^^ 

The court in East Chicago started with a description of third-party 
beneficiary law in general: 

One who is not a party to a contract may enforce the contract by 
demonstrating it is a third-party beneficiary. A third-party beneficiary 
contract exists when ( 1 ) the parties intend to benefit a third party; (2) the 
contract imposes a duty on one of the parties in favor of the third party; 
and (3) the performance of the terms of the contract renders a direct 
benefit to the third party intended by the parties to the contract. ^^^ 

313. Id.atllS. 

314. Id. The court in Vectren reasoned that if the LLC members had standing in this case, 
every past, present or future member, officer, director, or employee of an LLC could have a separate 
justiciable claim against an insurer anytime the LLC or any other insured was denied coverage. Id. 

315. 878 N.E.2d 358 (Ind. Ct. App. 2007), trans, granted and rev'd in part and ajf' d in part, 
908N.E.2d611 (Ind. 2009). 

316. /J. at 375. 

317. Id. at 366. 

318. Mat 367. 

319. Id. 

320. Id. 

321. Id. 

322. Id. 

323. Id. at 374 (internal citations omitted). 


The court noted that 

[a]mong these three factors, the intent of the contracting parties to 
benefit the third party is the controlling factor. Such intention may be 
demonstrated by naming the third party, or by other evidence. The 
necessary intent is not a desire or purpose to confer a particular benefit 
upon the third party nor a desire to advance his interest or promote his 
welfare, but an intent that the promising party or parties shall assume a 
direct obligation to him.^^"^ 

The City of East Chicago argued that the foundations and the corporations 
were "merely conduits for the citizens of East Chicago, the true intended 
beneficiaries. "^^^ hi other words, the City argued that the letters did not evidence 
an intent to benefit the foundations and the corporation. ^^^ 

The court in East Chicago disagreed, stating that the "relevant intent" for 
purposes of third-party beneficiary analysis is "an intent that the promising party 
or parties shall assume a direct obligation to the third party, and not a desire or 
purpose to confer a particular benefit on the third party."^^^ Based on this 
statement, the court in City of East Chicago "declined" to hold that the 
foundations or the corporation were "conduits."^^^ The court concluded that the 
foundations and the corporations were third-party beneficiaries of the letter 
agreements. ^^^ 

324. Id. 

325. Id. 

326. Id. 

327. Id. (citing Nat'l Bd. of Exam' rs for Osteopathic Physicians & Surgeons, Inc. v. American 
Osteopathic Physicians & Surgeons Ass'n, 645 N.E.2d 608, 618 (Ind. Ct. App. 1994)). 

328. /J. at 375. 

329. Id. The court in City of East Chicago also rejected the City's argument that third-party 
beneficiaries should not be recognized in a "pubhc contract," because, according to the City, non- 
parties should not be allowed to "control a government contract in opposition to the will of the 
government." Id. (distinguishing Jenne v. Church & Tower, Inc., 814 So. 2d 522 (Fla. Dist. Ct. 
App. 2002)). 

Recent Developments in Indiana Civil Procedure 

Daniel K. Burke* 

During the survey period,^ the Indiana Supreme Court and the Indiana Court 
of Appeals rendered several decisions addressing principles of state procedural 
law and providing helpful interpretations of the Indiana Rules of Trial Procedure. 

I. Indiana Supreme Court Decisions 

A. Personal Jurisdiction 

In Stewart v. Vulliet^ the Indiana Supreme Court interpreted the provisions 
of the Uniform Child Custody Jurisdiction Law (UCCJL) in conjunction with a 
custody dispute between the child's mother, a Washington resident, and the 
child's father, an Indiana resident.^ The court concluded that, although Indiana 
and Washington had concurrent jurisdiction, it was within the trial court's 
discretion to dismiss the Indiana action and defer to the Washington court."^ 

Stewart (the father) and Vulliet (the mother) were married in Washington in 
August 1992 and moved to Indiana in May 2003.^ In November 2003, while 
Vulliet was pregnant with the couple's first child, she filed a petition for 
dissolution of the couple's marriage and subsequently returned to Washington.^ 
Stewart initiated proceedings in Indiana and obtained several orders pertaining 
to the child's custody in 2004 and 2005.^ In November 2005, Vulliet filed an 
action in a Washington court, seeking to establish a ''parenting plan."^ The 
Washington court initially declined to exercise jurisdiction in light of the pending 
matter in Indiana.^ However, in January 2006, the Washington court granted 
Vulliet' s motion to reconsider, as well as Vulliet' s motion for default and entered 
a temporary parenting plan, which was made permanent in March 2006.*° In 
April 2006, Vulliet requested that the Indiana court dismiss the Indiana action. 

* Partner, Hoover Hull LLP, Indianapolis, Indiana, B.S., 1994, Indiana University — 
Bloomington; J.D., 1999, cum laude. Southern Methodist University School of Law. The views 
expressed herein are solely those of the author. 

1 . This Survey discusses select Indiana Supreme Court and Indiana Court of Appeals 
decisions during the survey period — i.e., from October 1, 2007, through September 30, 2008 — as 
well as amendments to the Indiana Rules of Trial Procedure, which were ordered by the Indiana 
Supreme Court during the survey period. 

2. 888 N.E.2d 761 (Ind. 2008). 

3. /6?. at 764-69. 

4. Mat 768-69. 

5. Id. at 163. 

6. Id. 

7. See id. 

8. Id. 

9. Id. 
10. Id. 

880 INDIANA LAW REVIEW [Vol. 42:879 

arguing that Indiana was an inconvenient forum. ^^ The trial court granted 
Vulliet's motion; ^^ however, the trial court premised its decision on its 
conclusion that Washington was better situated to manage the custody issues. ^^ 
The Indiana Supreme Court granted transfer and began its analysis with a 
discussion of the UCCJL, which is codified at the Indiana Code section 31-17-3- 
3 (2008).^"^ The court discussed the four factors a court must consider when 
conferring jurisdiction in a child custody matter and concluded that Indiana Code 
section 3 l-17-3-3(A)(4), which confers jurisdiction upon Indiana if the child has 
no home state and jurisdiction in Indiana is in the child's best interest, 
controlled. ^^ At the time Vulliet filed her petition for dissolution, the child had 
not yet been bom and, therefore, had no home state. ^^ The court reasoned that, 
upon the child's birth, Washington became her home state, such that Indiana and 
Washington had concurrent jurisdiction with respect to child custody issues.^^ 
The court further noted that, because custody proceedings were already pending 
in Indiana, Washington would not be able to exercise jurisdiction, unless the 
Indiana court first terminated or stayed the Indiana proceedings.^^ However, the 
court concluded that the trial court properly exercised its discretion in 
determining that Washington was better suited to manage issues pertaining to the 
child's custody and visitation and dismissed the Indiana action. ^^ 

B. Preferred Venue 

In Randolph County v. Chamness,^^ the court resolved a unique venue 
dispute, arising from an auto accident that occurred in two different counties.^^ 

Chamness was a passenger in a vehicle traveling along Randolph County 
Road 300 North toward the Delaware County line.^^ As the vehicle entered a 
curve, the driver lost control. The vehicle left the road, overturned, ejected 
Chamness and caused her serious injuries when she landed across the county line 
in Delaware County.^^ Chamness, a Randolph County resident, filed suit against 
Randolph County in Delaware Circuit Court, alleging that Randolph County had 
negligently constructed, maintained and supervised the portion of the roadway 

11. Id. 

12. Id. 

13. /^. at 763-64. 

14. /^. at 764-69. 

15. /^. at 764-66. 

16. Id. at 765. 

17. /^. at 765-66. 

18. Id. at 166. 

19. Mat 766-68. 

20. 879 N.E.2d 555 (Ind. 2008). 

21. Mat 558. 

22. M. at 556. 

23. Id. 


on which the accident occurred.^"^ Randolph County filed a motion for change 
of venue, arguing that Randolph County is the only preferred venue under Rule 
75.^^ Following a hearing, the trial court denied Randolph County's motion.^^ 
The court of appeals reversed the trial court's decision, concluding that Rule 
75(A)(3) provides that preferred venue is the county where the tortious conduct, 
i.e., the alleged negligence, occurred.^^ 

The Indiana Supreme Court granted transfer and affirmed the trial court.^^ 
The court began its analysis with the general proposition that ''any case may be 
venued in any county in the state, subject to the right of an objecting party to 
request that the case be transferred to a preferred venue listed in Rule 75(A)."^^ 
The court further noted that there are often more than one preferred venues for 
any given case, and, if an action is filed in a preferred venue, the trial court may 
not grant a change of venue.^^ This case, the court noted, involved consideration 
of two preferred venue provisions in Rule 75(A).^^ Rule 75(A)(5) places 
preferred venue in a county where one or more individual plaintiffs reside, if a 
government organization is a defendant, or where the principal of a governmental 
organization is located.^^ Both the plaintiff and defendant governmental entity 
resided in Randolph County.^^ However, Rule 7(A)(3) provides for preferred 
venue in a county where a motor vehicle accident occurred.^"^ The court noted 
that the determinative issue is whether Delaware County is a preferred venue as 
the county in which the accident occurred.^^ 

Citing the "spirit of convenience underlying the venue rules," the court 
concluded that Delaware County would be just as convenient a forum as 
Randolph County .^^ Further, aspects of the accident occurred in both Randolph 
County and Delaware County.^^ Accordingly, the court concluded that preferred 
venue would exist in either county, noting that, "if a car runs off the road in one 
county and lands in another, an injured plaintiff may file suit in either county."^^ 

24. Id. 

25. Id. 

26. Id. 

27. Id. 

28. Id. 

29. Id. 

30. Id. at 556-57. 

31. /J. at 557. 

32. IND. Trial R. 75(A)(5); see also Chamness, 879 N.E.2d at 557. 

33. Chamness, 879 N.E.2d at 557. 

34. iND. Trial R. 75(A)(3); see also Chamness, 879 N.E.2d at 557. 

35. Chamness, 879 N.E.2d at 557. 

36. Id. at 558. 

37. Id. 

38. Id. 

882 INDIANA LAW REVIEW [Vol. 42:879 

C Discovery 

In Bridgestone Americas Holding, Inc. v. Mayberry,^^ the court, in a matter 
of first impression in Indiana, adopted a three-part analysis to determine whether 
to protect trade secret information from discovery ."^^ 

Following a fatal car accident, the plaintiff brought a product liability action 
against Bridgestone, alleging that the accident resulted from tire tread 
separation."^ ^ During discovery, the plaintiff requested the "formula for the steel 
belt skim stock" for the tire involved in the accident."^^ Bridgestone objected and 
moved for a protective order, claiming that this information constituted a trade 
secret."^^ The trial court declined to bar discovery of this formula and ordered that 
it be produced subject to certain restrictions as to its use and dissemination.'^'^ 

The Indiana Supreme Court granted transfer and formally adopted a three- 
part test to determine whether a party's trade secret information could be 
protected from discovery ."^^ The court reasoned that the Indiana legislature's 
adoption of the Uniform Trade Secret's Act shows a legislative "intent to apply 
trade secret law uniformly with other jurisdictions.'"^^ In light of this legislative 
intent and the numerous other jurisdictions, including the federal courts, already 
employing it, the court formally adopted the three-part balancing test to 
determine whether trade secret information should be protected from discovery ."^^ 

First, the party seeking to protect trade secret information bears the burden 
of demonstrating that the information is a trade secret, as defined by the Indiana 
Trade Secret's Act."^^ The court concluded that Bridgestone had carried its 
burden and established that the formula in question constituted a trade secret."^^ 

Second, if the producing party establishes that the information at issue is a 
trade secret, the burden shifts to the requesting party to demonstrate that the 
information is both relevant and necessary.^^ To establish that the information 
is necessary, the requesting party bears the burden of establishing that "without 
discovery of the particular trade secret, the discovering party would be unable to 
present its case 'to the point that an unjust result is a real, rather than merely 
possible, threat. '"^^ 

Finally, if both parties have met their respective burdens, the court must 


878 N.E.2d 189 (Ind. 2008). 


Id. at 194. 


Id. at 190-91. 


Id. at 191. 






Id. at 191, 194. 


Id. at 194. 






Id. at 195. 




Id. at 196 (quoting In 

re Bridgestone/Firestone, 


, 106S.W.2d730,733(Tex. 



balance the harm caused by disclosure of the trade secret against the requesting 
party' s need for the information.^^ Because the court concluded that the plaintiff 
had not met its burden of demonstrating that discovery of the trade secret 
information was necessary, however, the final step in the analysis was not 
necessary in this case.^^ Accordingly, the court reversed the trial court's 
protective order requiring that Bridgestone disclose its trade secret. ^"^ 

D. Summary Judgment 

1. Determination of Reasonable Care as a Matter of Law. — In Lean v. 
Reed,^^ the court concluded that, in certain circumstances, the reasonableness of 
a party's conduct can be determined as a matter of law for purposes of summary 
judgment. ^^ The plaintiffs, shareholders in a corporation, brought an action 
against the corporation's officers and directors, including Lean, alleging various 
violations of the Indiana Security Law.^^ The plaintiffs also sought to impose 
individual liability upon Lean in accordance with section 19(d) of the Act.^^ The 
plaintiffs moved for partial summary judgment as to liability only, with damages 
to be determined at trial. ^^ Lean opposed summary judgment, arguing, in part, 
that he exercised reasonable care and, therefore, could not be liable under section 
19(d).^° The trial court rejected Lean's argument and entered partial summary 
judgment in favor of the plaintiff s.^^ 

The Indiana Supreme Court granted transfer and affirmed the trial court.^^ 
The court began its analysis by agreeing with Lean that "summary judgment is 
rarely appropriate as to a director's reasonable care."^^ The court further noted 
that reasonable care is ordinarily a fact issue, preventing summary judgment.^"^ 
However, the court stated that "in extreme cases, conduct might be reasonable 
or unreasonable as a matter of law."^^ According to the undisputed facts in the 
record. Lean simply assumed the challenged transactions complied with 
applicable law;^^ however, he did not consult with anyone or review any 




Id. at 197. 




876 N.E.2d 1 104 (Ind. 2007) 


/c?. at 1113. 


Id. at \ 106. 






See id. 




Mat 1107, 1114. 


Mat 1113. 






Mat 1113-14. 

884 INDIANA LAW REVIEW [Vol. 42:879 

documents in reaching his conclusion.^^ The court concluded: "[B]lind 
assumption that all is well leaves the investing public in the same position as if 
there were no directors of the corporation. The statute places liability on the 
directors and officers to get their attention. If they respond with inattention, they 
proceed at their own risk."^^ 

2. Designation of Summary Judgment Evidence. — In Filip v. Block,^^ the 
Indiana Supreme Court clarified requirements for designation of evidence in 
support of a motion for summary judgment.^^ 

The Filips filed suit against their insurance agent for failing to secure 
adequate insurance coverage, resulting in substantial uncovered loss following 
a fire at the Filips' property.^^ The insurance agent responded with a motion for 
summary judgment, in which she provided general designations of evidence in 
the motion and more specific designations of evidence in the memorandum in 
support of the summary judgment motion.^^ The Filips failed to file a response 
or designate evidence within the time limits specified in Rule 56(C).^^ The trial 
court limited the Filips' evidence in opposition to summary judgment to the 
specific designations contained in the insurance agent's summary judgment 
memorandum.^"^ The trial court granted the summary judgment motion.^^ 

The Indiana Court of Appeals reversed, concluding that the Filips could rely 
on the designations of evidence contained in the insurance agent's motion, not 
just the specific lines and paragraphs designated in the summary judgment 
memorandum. ^^ 

The Indiana Supreme Court granted transfer and affirmed the trial court's 
grant of summary judgment.^^ First, the court noted that Rule 56(C) does not 
require any particular form of designation but that it does require specificity. ''^ 
Further, the court observed that the parties are free to choose the placement of the 
designation of evidence, e.g., in a summary judgment motion, in a memorandum 
in support of summary judgment or in a separate filing.^^ The court concluded, 
however, that a party' s designation of evidence must be contained in a single 
location.^^ In this case, the insurance agent's designation appeared in both the 

67. Id. 

68. /6f. at 1114. 

69. 879 N.E.2d 1076 (Ind. 2008). 

70. Id. at 1081-82. 

71. Mat 1079. 

72. Id. 

73. Id. 

74. Id. at 1079-80. 

75. Id. at 1080. 

76. Id. 

11. Id. at 1080, 1086. 

78. Id. at 1081. 

79. Id. 

80. Id. 


summary judgment motion and supporting memorandum. ^^ Moreover, if a party 
designates both specific lines or test and also designates a more general 
identification of the document containing specific lines or test, the court may 
limit the party to the more specific designations.^^ However, the court concluded 
that a party opposing summary judgment may rely on any of the movant's 
designations of evidence, even if the evidence is inconsistently designated in 
separate places.^^ Accordingly, the Lidiana Supreme Court affirmed the court of 
appeal's decision and reversed the trial court's grant of summary judgment. ^"^ 

E. New Trial 

1. Motion for Judgment on the Evidence Distinguished from Motion to 
Correct Error. — In Ho v. Frye,^^ the court clarified the distinction between the 
proper remedy for a motion for judgment on the evidence and a motion to correct 
error. ^^ 

The plaintiff filed a medical negligence action alleging that she sustained 
damages as a result of her surgeon's failure to remove sponges following an 
abdominal surgery.^^ The plaintiff filed a motion for partial summary judgment 
as to liability, with damages to be determined at trial.^^ The trial court denied the 
motion, and the jury returned a verdict in favor of the surgeon. ^^ Following the 
trial, the plaintiff filed a Rule 50 motion for judgment on the evidence and, 
shortly thereafter, filed a motion to correct error pursuant to Rule 59(J).^^ The 
trial court ordered a new trial as to both liability and damages but made no 
special findings of fact and offered no explanation as to the basis for its order. ^* 

The Indiana Supreme Court granted transfer and sought to clarify the 
situation.^^ The court noted that, under Rule 50(C), the trial court may grant a 
new trial as to any or all of the issues and need not enter supporting findings. ^^ 
The court reasoned that, in ruling on a Rule 50(C) motion, the court must 
consider only the evidence most favorable to the non-moving party and may grant 
relief only if there is no evidence with respect to an essential element of the 
claim.^"^ However, in ordering a new trial under Rule 59(J), the trial court acts 


See id. at 1079. 


Id. at 1081. 




Id. at 1086. 


880 N.E.2dl 192 (Ind. 2008) 


M. at 1195-97. 


Mat 1194. 


Mat 1195. 






Mat 1195. 


Mat 1194. 


M. at 1195. 


M. at 1196. 

886 INDIANA LAW REVIEW [Vol. 42:879 

as the "'thirteenth juror'" and must "sift and weigh the evidence and judge 
witness credibility."^^ Accordingly, a new trial under Rule 50(C) is only 
appropriate "when there is a glaring absence of critical evidence or reasonable 
inferences — a critical failure of proof. "^^ However, in ordering a new trial under 
Rule 59(J), the trial court must determine that the jury's verdict is contrary to the 
weight of the evidence, which requires "careful sifting and evaluation."^^ Rule 
59(J) also requires that the court enter special findings.^^ The proper remedy for 
the trial court's failure to do so is reinstatement of the verdict.^^ 

Not only did the trial court' s order not include special findings, but it also did 
not specify whether the new trial was ordered pursuant to Rule 50 or Rule 59.^^^ 
However, the court concluded that, because the trial court's order granted a new 
trial as to both liability and damages, the trial court must have intended to grant 
the Rule 59(J) motion. '^^ Nevertheless, because the trial court failed to enter 
specific findings in conjunction with its granting of a Rule 59(J) motion, its order 
for a new trial was reversed and the verdict reinstated. ^^^ 

2. Newly Discovered Evidence. — In Speedway Superamerica, LLC v. 
Holmes, ^^^ the Indiana Supreme Court held that a new trial was appropriate 
where evidence was disclosed for the first time on the first day of trial. ^^ 

The plaintiff, Holmes, filed a premises liability action against Speedway, 
alleging that he slipped and fell on spilled diesel fuel at a Speedway's truck 
stop.^^^ Approximately ten days before trial. Holmes' counsel learned that 
Holmes still had possession of the jeans and boots that he was wearing at the 
time of the accident. ^°^ Holmes' counsel instructed Holmes to bring these items 
to the courthouse for trial but did not advise Speedway's counsel regarding the 
existence of this evidence until the morning of the first day of trial. ^^^ At trial. 
Holmes attempted to introduce the jeans, which had a dark spot that could be 
diesel fuel, into evidence. ^^^ Speedway's counsel objected because there was no 
way to know whether the dark stain on the jeans was, in fact, diesel fuel.^^^ The 
trial court admitted the jeans into evidence but instructed that there would be no 


Id. (quoting Keith v. 

Mendus, 661 N.E.2d 26, 

31(Ind.Ct.App. 1996)). 










Id. at 1197. 






885 N.E.2d 1265 (Ind. 2008). 


Id. at 1273-74. 


Id. Sit 1266-67. 


Id. at 1267. 






Id. at 1267-68. 


testimony or inference that the dark stain was in fact diesel fuel.^^^ The jury 
returned a verdict favorable to Holmes.^^^ 

Following trial. Speedway filed a motion to correct error and for relief from 
judgment under Rules 59 and 60, arguing that testing of the jeans would reveal 
new evidence that could not be discovered and produced by Speedway in time 
for trial, i.e., whether the stain was actually diesel fuel and, if so, whether it was 
Speedway's diesel fuel.^^^ The trial court granted Speedway's motion to test the 
jeans and, following testing, conducted a hearing.^ ^^ During the hearing. 
Speedway's chemist testified that the stain on the jeans was not diesel fuel, that 
the jeans had been laundered with detergent and, upon examination of the tags, 
the jeans had not been manufactured as of the date of Holmes' accident and, 
therefore, could not have been worn on that date.^'"^ Nevertheless, the trial court 
denied Speedway's motion for a new trial. ^^^ 

The Indiana Supreme Court granted transfer and reversed the trial court's 
denial of Speedway's motion for new trial. ^^^ First, the court listed the 
requirements for a new trial based on newly discovered evidence. ' ^^ Specifically, 
the court concluded that a new trial would be warranted if: 

(1) the evidence has been discovered since the trial; (2) it is material and 
relevant; (3) it is not cumulative; (4) it is not merely impeaching; (5) it 
is not privileged or incompetent; (6) due diligence was used to discover 
it in time for trial; (7) the evidence is worthy of credit; (8) it can be 
produced upon a retrial of the case; and (9) it will probably produce a 
different result at trial. ^^^ 

In the court's estimation, the only factor at issue was whether Speedway had 
exercised sufficient diligence in discovering the jeans in time for trial.* ^^ Holmes 
argued that Speedway should have requested production of the jeans during 
discovery and performed necessary testing before trial or that Speedway should 
have requested a continuance of the trial to test the jeans. *^^ The court rejected 
these argument in light of Holmes' conduct in concealing the existence of the 
jeans until the morning of the first day of trial. *^* Accordingly, the court 
concluded that Speedway could not have discovered the existence of the jeans 
and conducted necessary testing even in the exercise of due diligence and. 

no. /J. at 1268. 

111. Mat 1269. 

112. Id. 

113. Id. 

114. Id. 

115. Id. 

116. Id. at 1210, 1214. 

1 17. Id. at 1271 (quoting Carter v. State, 738 N.E.2d 668, 671 (Ind. 2000)). 

118. Id. (quoting Carter, 738 N.E.2d at 67 1 ). 

119. Id. at 1212. 

120. Id. at 1212-13. 

121. Id. at 1272-74. 

888 INDIANA LAW REVIEW [Vol. 42: 879 

therefore, concluded that a new trial was appropriate. ^^^ 

n. Indiana Court of Appeals Decisions 

A. Standing 

In Vectren Energy Marketing & Service, Inc. v. Executive Risk Specialty Ins. 
Co.}^^ the court affirmed the trial court's dismissal of the plaintiffs action for 
lack of standing. ^^"^ The plaintiffs, the two members of a limited liability 
company (LLC), brought suit against the LLC's insurer, alleging breach of 
contractual obligations owed by the insurer to the LLC.*^^ However, the court 
concluded that, while the plaintiffs were covered by the LLC's insurance policy, 
they lacked standing to assert the LLC s contractual claims against the insurer. ^^^ 

B. Subject Matter Jurisdiction 

In H.D. V. BHC Meadows Hospital, Inc.,^^^ the court reversed the trial court' s 
dismissal of the Dosses' claim for lack of subject matter jurisdiction. ^^^ 

Upon finding what appeared to be a suicide note written by their daughter, 
the Dosses referred the matter to a school counselor. '^^ The school counselor, in 
turn, referred the Dosses to the defendant adolescent psychiatric hospital. ^^^ The 
psychiatric nurse who met with the Dosses recommended that their daughter be 
admitted for treatment. ^^^ The Dosses were reluctant, expressing concerns about 
how hospitalization might affect their daughter's reputation at school. ^^^ The 
nurse assured them that their daughter' s treatment would be kept confidential and 
further agreed that there would no communications with anyone at the school 
regarding their daughter's hospitalization or treatment. ^^^ 

However, the therapist treating the Dosses' daughter sent a letter by facsimile 
to the school therapist, thanking him for the referral and updating him as to the 
progress of treatment. ^^"^ The therapist did not, however, send the fax to the 
counselor's direct fax line.^^^ Rather, the fax was transmitted to the school's 


Id. at 1274. 


875 N.E.2d 774 (Ind. 


App. 2007). 


Id. at 779. 


Id. at 776-77. 


Id. at 777-79. 


884 N.E.2d 849 (Ind. Ct. App.), trans. 

denied, 898 N.E.2d 1226 (Ind. 2008). 


Id. at 856. 


/^. at 851. 










Mat 851-52. 


Id. Sit 852. 


main fax line, where it was viewed by a number of faculty members. ^^^ The 
therapist also sent a second letter via fax to the school's main fax line.^^^ The 
second letter contained a satisfaction survey relating to the Dosses' daughter's 
treatment and hospitalization. ^^^ 

The Dosses filed suit against the hospital, alleging invasion of privacy, 
negligent infliction of emotional distress, intentional/reckless infliction of 
emotional distress and violations of confidentiality obligations. ^^^ The hospital 
responded with a motion to dismiss, arguing that the Dosses' claims were subject 
to the Indiana Medical Malpractice Act, which requires that the claims first be 
submitted to a medical review panel prior to filing an action in an Indiana 
court. '"^^ The trial court granted the motion, and the Dosses appealed. '"^^ 

The court acknowledged that a medical malpractice action must first be 
submitted to a medical review board before it can be filed in court. '"^^ In other 
words, the court observed the Medical Malpractice Act grants subject matter 
jurisdiction to the medical review board first, and then to the trial court. ^"^^ 
However, the court concluded that the therapist' s transmission of information did 
not constitute ''health care or professional services provided to a patient," so the 
communications did not constitute medical malpractice.^"^ Therefore, because 
this was not a medical practice action, the Dosses were not required to first 
submit their claims to a medical review board, the trial court erred in dismissing 
the Dosses' claim for lack of subject matter jurisdiction.^'^^ 

C Limitations 

1. Limitations in a Legal Malpractice Action. — In Ickes v. Waters,^^^ the 
court affirmed the trial court's entry of summary judgment where the applicable 
statute of limitations had run with respect to the plaintiff's legal malpractice 
action. '"^^ 

The defendant attorney assisted the plaintiff and her husband in transferring 
their assets into a trust, establishing the plaintiff's husband as the trustee and 
vesting him with sole power to amend or revoke the trust during his lifetime. ^"^^ 














Id. at 853. 




Id. at 854. 


Id. at 856. 


879 N.E.2d 1105 (Ind. 


App.), clarified by 


'g and 

reaff'd, 886 N.E.2d 643 (Ind. 


. App.), trans, denied, 898 N.E.2d 1222 (Ind. 2008). 


Mat 1110. 


/J. at 1107. 

890 INDIANA LAW REVIEW [Vol. 42: 879 

Upon his death, the trust would become irrevocable. ^"^^ On May 7, 2001, the 
plaintiff and her husband met with the defendant and formally transferred their 
assets into the trust. ^^° Following her husband's death on July 25, 2003, the 
plaintiff and her husband's daughter, the new trustee, disagreed regarding the 
plaintiffs income under the trust. ^^^ The plaintiff filed a legal malpractice action 
against the defendant, who responded with a summary judgment motion based 
on the running of the applicable limitations.'^^ 

On appeal, the court concluded that the applicable limitations period begins 
to run when the plaintiff knows of, or in the exercise of reasonable diligence 
could have discovered, the wrongful conduct. '^^ Plaintiff argued that she became 
aware of the defendant's alleged negligence upon the death of her husband. '^"^ 
However, the court concluded that the limitations period begins to run when the 
tortious conduct occurs, not when damages are realized. '^^ The court determined 
that the defendant's negligence, if any, occurred when the plaintiff and her 
husband transferred their assets into the trust, and limitations began to run from 
that date.'^^ Because this transfer took place more than two years before the 
plaintiff filed her legal malpractice action, the claim was barred by limitations, 
and the court affirmed the trial court' s entry of summary judgment in favor of the 
defendant attorney. '^^ 

2. Continuing Wrong and Fraudulent Concealment. — In Johnson v. 
BlackwelU^^^ the court affirmed the trial court' s dismissal of the plaintiff s claims 
for civil rights violations, false imprisonment/false arrest, wrongful infliction of 
emotional distress and invasion of privacy by intrusion on limitations grounds. '^^ 

The plaintiff's claims arose from his arrest and the search of his home on 
February 27, 2003.*^^ Responding to an anonymous tip, police met with the 
plaintiff at his home and requested his permission to search the premises.'^' 
Eventually, the plaintiff permitted the search and the police officers discovered 
crack cocaine. '^^ The police arrested the plaintiff and subsequently charged him 
with possession with intent to distribute crack cocaine. '^^ 

Following the reversal of his conviction and dismissal of the indictment 

149. Id. 

150. Id. 

151. /d at 1107-08. 

152. /d at 1108. 

153. Id. 

154. Mat 1107-08. 

155. Mat 1108-09. 

156. Mat 1109. 

157. Id. 

158. 885 N.E.2d 25 (Ind. Ct. App. 2008). 

159. M. at33. 

160. M. at 27-28. 

161. M. at28. 

162. Id. 

163. Id. 


against him in 2006, the plaintiff filed a complaint asserting claims for civil 
rights violations, false imprisonment/false arrest, wrongful infliction of 
emotional distress and invasion of privacy by intrusion. ^^"^ 

The court concluded that each of these claims, except for the civil rights 
claim, accrued on February 27, 2003, when the plaintiff was arrested and his 
home searched. ^^^ The court further concluded that the plaintiffs civil rights 
claim accrued for limitations purposes in March 2003, when the plaintiff was 
bound over for trial. ^^^ Because each of these claims was subject to the two-year 
limitations period for actions involving injury to person, the court held that the 
plaintiffs claims were time-barred.'^^ 

The court rejected the plaintiffs argument under the continuing wrong 
doctrine, which tolls the running of limitations until the end of a continuing 
wrongful act.'^^ The court noted that the continuing wrong doctrine does not 
apply where the plaintiff is aware of facts that should lead to the discovery of his 
cause of action, even if the defendant continues its wrongful conduct beyond that 
point. '^^ Because the plaintiff was immediately aware of the acts upon which his 
claims were premised, i.e., his arrest and the search of his home, the continuing 
wrong doctrine did not apply. '^^ 

The court also rejected the plaintiffs fraudulent concealment argument.' '^^ 
Fraudulent concealment will toll the running of limitations if the liable party 
intentionally conceals the operative facts from the plaintiff. '^^ Again, however, 
because the plaintiff was fully aware of the facts upon which his claims were 
based as of the date he was arrested and his home was searched, there were no 
facts concealed from him.'^^ Accordingly, the doctrine of fraudulent 
concealment did not operate to toll the running of the limitations period and the 
plaintiffs claims were time barred.'^'' 

D. Service of Process 

In Goodson v. Carlson,^^^ the court reversed the trial court's motion to set 
aside a default judgment where service of process on the defendant was 

164. Id. at 29. 

165. Mat 30. 

166. /J. at 31. 

167. Id. 

168. Id. at 32. 

169. Id. 

170. Id. at 31-32. 

171. /J. at 32. 

172. Id. 

173. Id. 

174. Id. 

175. 888 N.E.2d 217 (Ind. Ct. App. 2008). 

176. Id. at 222. 

892 INDIANA LAW REVIEW [Vol. 42:879 

Following an automobile accident, Carlson filed suit against Goodson, 
alleging that he was negligent in the operation of his vehicle. ^^^ Carlson first 
sought to have Goodson personally served with process; however, because 
Carlson failed to provide Goodson' s specific apartment number, the sheriff was 
unable to effect service. ^^^ Carlson took no further action for several months 
until requesting leave to file an alias summons in response to the trial court's 
notice of intent to dismiss for failure to prosecute. ^^^ Carlson continued to take 
no action until nearly a year later when Carlson requested permission from the 
court to serve Goodson with process by publication in accordance with Trial 

On appeal, the court concluded that Carlson was not sufficiently diligent in 
attempting to ascertain Goodson' s address before seeking leave to serve Goodson 
by publication. ^^^ Carlson had merely attempted to obtain Goodson' s address 
through Bureau of Motor Vehicles records. ^^^ However, they did not attempt to 
get more accurate or specific information through Goodson' s auto insurer or 
through the manager of the apartment building where Goodson resided. ^^^ 

E. Venue 

In Johnson County Rural Electric Membership Corp. v. South Central 
Indiana Rural Electric Membership Corp.,^^"^ the court reversed the trial court's 
denial of the defendant's motion for automatic change of judge. ^^^ 

The plaintiff filed a complaint seeking a preliminary and permanent 
injunction preventing the defendant from removing the plaintiff s electric meters 
from the plaintiff's customer's homes. ^^^ Before the defendant filed an answer 
to the plaintiff's complaint, the trial court scheduled a preliminary injunction 
hearing. ^^^ Following the hearing, the trial court entered a preliminary injunction 
in favor of the plaintiff and scheduled a pretrial conference. ^^^ One day after the 
trial court entered the preliminary injunction, the defendant filed a motion for 
automatic change of judge pursuant to Rule 76(B).^^^ The trial court denied the 
motion, and the defendant appealed. ^^^ 

177. Mat 218. 

178. Mat 221. 

179. Id. 

180. Id. 

181. Mat 222. 

182. M. at 221-22. 

183. Id. 2X222. 

184. 883 N.E.2d 141 (Ind. Ct. App. 2008). 

185. Id at 146. 

186. Id at 142. 

187. Id. 

188. Id 

189. Id 

190. Id. 


On appeal, the court determined that the defendant's motion for automatic 
change of judge was timely under Rule 76(C) and, therefore, reversed the trial 
court' s denial. ^^^ The court embraced the defendant' s argument that, because the 
issues had not yet closed on the merits, the motion for automatic change of judge 
was timely under Rule 76(C). '^^ In reaching this conclusion, the court rejected 
the plaintiff's argument under Rule 76(C)(5), which provides that a party waives 
its right to an automatic change of judge if it does not make its request within 
three days of the trial court's order setting a trial date.^^^ The court concluded 
that the trial court's order scheduling the preliminary injunction hearing did not 
constitute an order setting the trial; therefore, Rule 76(C)(5) did not apply, and 
the defendant did not waive its right to an automatic change of judge. '^"^ 

F. Pleadings 

1. Leave to Amend. — In Turner v. Franklin County Four Wheelers, Inc.,^^^ 
the court reversed the trial court's denial of the plaintiff's motion for leave to 
amend her complaint. ^^^ 

Due to either human error or a computer malfunction, the plaintiff's 
complaint did not include her attorney's signature. ^^^ The defendant filed a 
motion to strike the complaint in accordance with Rule 1 1(A) because it was not 
signed. ^^^ The plaintiff responded by moving for leave to amend the 
complaint. *^^ However, because the limitations period had run by that time, the 
defendant moved to dismiss the complaint.^^^ Following a hearing, the trial court 
denied the plaintiff's motion for leave to amend and granted the defendant's 
motion to dismiss the complaint.^^^ 

On appeal, the court noted that procedural rules are "'extremely important,'" 
but are '"merely a means for achieving the ultimate end of an orderly and speedy 
justice. '"^^^ Moreover, the court observed that it should "never ignore the plain 
fact that the consequence of strict adherence to procedural rules may occasionally 
defeat rather than promote the ends of justice."^^^ Accordingly, the court held 
that, because there was no undue delay, bad faith or dilatory motive by plaintiff 
and no repeated failure to cure pleading deficiencies, the trial court abused its 

191. /^. at 143. 

192. Id. 

193. Id. 

194. Id. at 144. 

195. 889 N.E.2d 903 (Ind. Ct. App. 2008). 

196. /^. at 908. ' 

197. Id. at 904. 

198. Id. 

199. Id. 

200. Id. 

201. /^. at 905. 

202. Id. (citations omitted). 

203. Id. (quoting Softwater Utils., Inc. v. Le Fevre, 301 N.E.2d 745, 750 (Ind. 1973)). 

894 INDIANA LAW REVIEW [Vol. 42:879 

discretion in refusing to allow the plaintiff to amend her complaint.^^"^ The court 
remanded the matter to the trial court with instructions to permit the plaintiff to 
amend her complaint and that the amendment would relate back to the date of the 
original filing, thereby avoiding a limitations issue.^^^ 

2. Amendment to Conform to Evidence. — In Bailey v. State Farm Mutual 
Automobile Insurance Co.^^^ the court affirmed the trial court's denial of the 
plaintiff s motion for leave to amend his complaint to conform with the evidence 
presented at trial.^^^ 

The court began its analysis by noting that the trial court should freely allow 
the parties to amend pleadings.^°^ However, in ruling on a motion for leave to 
amend pleadings to conform with the evidence presented at trial, the court must 
first determine whether sufficient evidence has been presented to support the 
elements of a particular claim or defense.^^^ The court concluded that, because 
Indiana does not recognize a cause of action for negligent entrustment of an 
automobile brought by a voluntarily intoxicated adult and because the evidence 
presented at trial would have been insufficient even if Indiana did recognize such 
a cause of action, the trial court properly exercised its discretion in denying leave 
to amend.^^^ 

G. Voluntary Dismissal 

In Knightstown Banner, LLC v. Town of Knightstown,^^^ the court affirmed 
the trial court's grant of the defendant's motion for voluntary dismissal of its 

The court reasoned that Rule 41(A)(2) permits a claimant to dismiss a claim 
voluntarily — even after a summary judgment motion has been filed — but only 
upon a court's order.^^^ The court further noted that voluntary dismissals should 
generally be allowed, unless the adverse party would suffer prejudice as a 
result.^^^ In this case, the plaintiffs primary claim of prejudice was its concern 
that the town could reassert the same claim at a later time.^^"^ However, upon 
reviewing the record, the court concluded that the voluntary dismissal was with 
prejudice, thereby eliminating the plaintiff s concern regarding relitigation of the 

204. /^. at 907-08. 

205. /^. at 908. 

206. 881 N.E.2d 996 (Ind. Ct. App. 2008). 

207. Mat 1006. 

208. /£?. at 1000-01. 

209. /^. at 1001. 

210. /^. at 1005. 

21 1 . 882 N.E.2d 270 (Ind. Ct. App.) (finding trial court did not err when imposing joint and 
several liability upon insurers with respect to attorney's fees and costs), supplemented by reh 'g, 889 
N.E.2d 317 (Ind. Ct. App. 2008). 

212. /J. at 274. 

213. Id. 

214. Id. 


defendant's voluntarily dismissed counterclaim.^ ^^ 

H. Involuntary Dismissal 

1. Failure to State a Claim. — In American Heritage Banco, Inc. v. 
McNaughton,^^^ the court affirmed, in part, the trial court's dismissal of the 
plaintiffs fraud claim for failure to state a claim.^^^ 

The plaintiff sought to avoid dismissal of its fraud claim by arguing that one 
of the defendants executed a promissory note with the stated purpose of paying 
off a previous loan; however, the stated purpose was intentionally and knowingly 
false and, as a result, the defendant obtained a loan which remains unpaid.^^^ 
However, as the court noted, the plaintiff attached a copy of the promissory note 
in question as an exhibit to its complaint.^^^ As reflected in the exhibit, the 
express purpose for the loan stated in the promissory note contradicted the 
allegation in plaintiff's complaint.^^^ Accordingly, the court rejected the 
plaintiff s characterization of the challenged loan transaction and noted "[a] court 
should not accept as true allegations that are contradicted by other allegations in 
the complaint or exhibits attached to or incorporated in the pleading."^^^ 

2. Want of Prosecution. — In Baker Machinery, Inc. v. Superior Canopy 

Corp.,^^^ the court affirmed the trial court's dismissal with prejudice pursuant to 

Following nearly two years of inactivity, the trial court entered an order 
pursuant to Rule 41(E), requiring that the plaintiff attend a hearing and show 
cause why the case should not be dismissed for want of prosecution.^^"^ In 
considering the numerous factors bearing on whether to dismiss a claim for lack 
of prosecution, the Indiana Court of Appeals noted that "'[a] lengthy period of 
inactivity may be enough to justify dismissal under the circumstances of a 
particular case, especially if the plaintiff had no excuse for the delay. '"^^^ The 
plaintiff sought to justify its delay in prosecuting its claims by explaining to the 

215. /J. at 274-275. 

216. 879 N.E.2d 1 1 10 (Ind. Ct. App.) (modifying, sua sponte, incorrect citations in its original 
opinion), supplemented by 2008 Ind. App. LEXIS 2553 (Ind. Ct. App. 2008). 

217. /J. at 1118. 

218. Mat 1115. 

219. Id. 

220. Id. 

221. Id. (citing Augdon v. Premier Props. USA, Inc., 755 N.E.2d 661, 665 (Ind. Ct. App. 

222. 883 N.E.2d 818 (Ind. Ct. App. 2008) (modifying the incorrect trial court cause number 
on the cover page), trans, denied, 898 N.E.2d 1221 (Ind. 2008), supplemented by 2009 Ind. App. 
LEXIS 2 (Ind. Ct. App. 2009). 

223. /J. at 825. 

224. Mat 820. 

225. Id. at 823 (quoting Lee v. Pugh, 811 N.E.2d 881, 885 (Ind. Ct. App. 2004)). 

896 INDIANA LAW REVIEW [Vol. 42:879 

court that it lacked financial resources to engage in the litigation.^^^ The court 
acknowledged that lack of financial resources may present a practical 
impediment to the diligent prosecution of an action; however, the court held that 
this would not excuse nearly two years of inactivity and affirmed dismissal 
pursuant to Rule 41(E).^^^ 

3. Same Matter Pending in Another Court. — In Beatty v. Liberty Mutual 
Insurance Group ^^^ the court affirmed the trial court' s dismissal of the plaintiff s 
claims pursuant to Rule 12(B)(8), because the same or a similar matter was 
already pending in another Indiana state court. ^^^ 

Beatty filed two separate actions against Liberty Mutual.^^^ Beatty sued 
Liberty Mutual and two other defendants in Marion Circuit Court in 2005, 
alleging that Liberty Mutual acted in bad faith in denying coverage under a 
policy it had issued to Beatty. ^^' In 2007, Beatty filed an action in Marion 
Superior Court against Liberty Mutual also alleging that Liberty Mutual breached 
its duty of good faith and fair dealing in denying coverage. ^^^ 

On appeal, the court concluded that, for purposes of a Rule 12(B)(8) motion, 
complete identity of the parties is not necessary; rather, because both Beatty and 
Liberty Mutual were parties to both actions, the court held that the two actions 
were between the same parties.^^^ Further, the court concluded that there was a 
substantial overlap in the subject matter of the two actions. ^^"^ Finally, the court 
observed that Beatty sought the same remedy from Liberty Mutual in both 
courts. ^^^ Accordingly, the court concluded that the actions filed by Beatty in 
Marion Circuit Court and Marion Superior Court were substantially the same 
and, therefore, affirmed the trial court's dismissal pursuant to Rule 12(B)(8).^^^ 

/. Discovery 

L Duty to Supplement. — In Dennerline v. Atterholt,^^^ the Indiana Court of 
Appeals affirmed the trial court's denial of the defendant's motion to strike the 
testimony of a belatedly disclosed witness. ^^^ 

In support of his argument that the plaintiff should not be permitted to 
present the testimony of a belatedly disclosed witness, the defendant relied upon 


Id. at 824. 


Id. at 824-25. 


893 N.E.2d 1079 (Ind. Ct. App. 2008) 


Id at 1088-89. 


Id. at 1086. 






Id. at 1087. 








886 N.E.2d 582 (Ind. Ct. App. 2008). 


Id. at 593, 603. 


the Rule 26(E)(1) obligation to supplement discovery responses.^^^ Specifically, 
the defendant argued that, because the plaintiff had not disclosed the witness in 
its interrogatory answers or final witness list, the witness should not be permitted 
to testify.^"^^ The court rejected this argument, as well as the defendant's 
argument that belatedly identified witnesses may be excluded at trial or a 
continuance may be granted to permit deposition of the witness.^"^' The court 
concluded that there was no bad faith because the plaintiff had previously 
disclosed the witness's identity to the defendant's counsel and because the 
defendant made no showing that any additional discovery pertaining to this 
witness would have made any difference at trial.^'^^ As the court observed, the 
defendant's primary argument was not that he was surprised by the belatedly 
identified witness's testimony, "but only that it was devastating to his 

2. New Trial as a Discovery Sanction. — In Nature 's Link, Inc. v. Przybyla,^'^ 
the court affirmed the trial court's grant of a new trial in response to the 
plaintiff's discovery misconduct.'"^^ 

In response to the plaintiffs interrogatories seeking identification of "all 
opinions and conclusions reached by any expert in the case," the defendants 
disclosed the content of its medical expert's anticipated testimony. '"^^ 
Approximately two weeks before trial, the plaintiffs counsel deposed the expert 
with respect to his recently-produced revised report, and the expert testified that 
the revised report contained all of his opinions regarding the plaintiff's medical 
condition. '"^^ However, after the plaintiff had rested his case-in-chief, the 
defendant' s medical expert identified a new theory, i.e. , that the plaintiff suffered 
from a genetic degenerative disorder that led to his medical condition. '"^^ The 
expert conceded that he had not disclosed this condition in any of his reports or 
during his deposition; however, he asserted that he had reached the diagnosis just 
a few days before trial.^'*^ 

The court began its analysis by noting that "Indiana's discovery rules are 
specifically designed to avoid surprise and a trial by ambush."'^^ The court 
concluded that the defendant breached its obligation to supplement discovery 
pursuant to Rule 26(E) because the defendant was aware of its expert's 
"materially revised medical opinion and subsequent change in intended testimony 

239. Mat 592. 

240. Id. 

241. Id. 

242. Id. at 593. 

243. Id. 

244. 885 N.E.2d 709 (Ind. Ct. App. 2008). 

245. Id. at 119. 

246. Id. at 116. 

247. Mat 717. 

248. Id. 

249. Id. 

250. Id. (quoting Canfield v. Sandock, 563 N.E.2d 526, 528 (Ind. 1990)). 

898 INDIANA LAW REVffiW [Vol. 42:879 

the day before trial."^^^ As a consequence of this failure, the court concluded that 
the plaintiff was unable to fairly present his case at trial. ^^^ Accordingly, the 
court affirmed the trial court's order for a new trial pursuant to Rule 60(B)(3).^^^ 

3. Purpose of Sanctions. — In Fifth Third Bank v. PNC Bank,^^^ the court 
reversed the trial court's order imposing sanctions for discovery abuses, 
determining that the sanctions imposed did not effectuate the purpose of Rule 37 

Following the plaintiff's failure to respond to document requests served by 
one of the defendants, the trial court entered an agreed order requiring that the 
plaintiff respond to the discovery requests within thirty days.^^^ However, the 
plaintiff again failed to respond, and approximately three months following the 
entry of the agreed order, the defendant moved to dismiss the plaintiffs 
complaint for failure to comply with discovery.^^^ The trial court granted the 
motion to dismiss, noting that the plaintiff s discovery conduct was '"particularly 
egregious'" and "'should not be without sanction. '"^^^ However, the trial court 
ordered that the dismissal apply only to one of the three defendants in the 

Upon appeal by the remaining defendants, the court first observed that one 
of the purposes underlying Rule 37 discovery sanctions is to punish or deter the 
violating party and thereby assure future compliance with the discovery rules. ^^^ 
The court concluded that, by dismissing one of the three defendants but taking 
no other adverse action toward the plaintiff, the trial court's sanctions order 
would have little, if any, deterrent effect.^^^ Accordingly, the court reversed the 
trial court's sanctions order and remanded with instructions that any sanctions 
order arising from the plaintiffs discovery misconduct must punish the 

4. Withdrawal of Deemed Admissions. — In Cross v. Cross,^^^ the court 
affirmed the trial court's grant to withdraw deemed admissions.^^ 

The court observed that, under Rule 36, the failure to respond timely to 
requests for admissions results in those matters being deemed admitted and 

251. Mat 718. 

252. Id. 

253. /d at 719. 

254. 885 N.E.2d 52 (Ind. Ct. App. 2008). 

255. /J. at 55-56. 

256. /J. at 54. 

257. Id. 

258. Id. 

259. Id. 

260. Id. at 55. 

261. Id. 

262. Id. at 55-56. 

263. 891 N.E.2d 635 (Ind. Ct. App. 2008). 

264. /J. at 641, 645. 


conclusively established.^^^ However, the court also observed that the party 
deemed to have made the admissions may move the court for withdrawal of the 
admissions under Rule 36(B).^^^ The trial court may not grant such a motion 
unless the withdrawal would "subserve the presentation of the merits" and would 
not result in prejudice to the party obtaining the admissions.^^^ The party seeking 
withdrawal bears the initial burden of establishing that presentation of the merits 
will be subserved by the withdrawal of the admissions.^^^ In this case, the court 
concluded that, because it was clear that the admitting party intended to dispute 
the issues raised in the request for admissions, she had made a sufficient showing 
that withdrawal of the admissions would subserve the presentation of the 
merits. ^^^ Further, the court concluded that the party having obtained the 
admissions bears the burden of demonstrating that it will be prejudiced by 
withdrawal of the admissions. ^^^ However, the party is not prejudiced merely by 
losing the benefit of the admissions at trial.^^^ Rather, the party bears the burden 
of demonstrating that he has suffered a detriment in the presentation of his case, 
e.g., an inability to produce a key witness or present important evidence.^^^ 
Because the party having obtained the admissions had approximately eighteen 
months to prepare his case, the court concluded that he had failed to show that 
he was prejudiced by withdrawal of the admissions.^^^ Accordingly, the court 
concluded that the trial court acted within its discretion in granting the motion 
to withdraw admissions. ^^^ 

J. Summary Judgment 

1. Summary Judgment Affidavits. — In Guzik v. Town of St. John,^^^ the court 
concluded that the trial court acted properly in striking portions of an affidavit 
submitted in support of summary judgment.^^^ 

Guzik, the former police chief of the Town of St. John, was asked to resign 
following the discovery of his numerous acts of misconduct. ^^^ Guzik agreed to 
resign but subsequently brought suit against the town and its police commission, 
alleging that he had been coerced to resign.^^^ In response, the town and police 

265. /^. at 639. 

266. Id. 

267. /^. at 639-40. 

268. Id. at 640. 

269. Id. 

270. Id. 

271. Id. 

272. Mat 640-41. 

273. Mat 641. 

274. Id. 

275. 875 N.E.2d 258 (Ind. Ct. App.), trans, denied, 891 N.E.2d 47 (Ind. 2008). 

276. M. at 265-66. 

277. Id. Sit 261. 

278. M. at 262. 

900 INDIANA LAW REVIEW [Vol. 42:879 

commission moved for summary judgment, arguing that Kuzik's resignation had 
been voluntary, not coerced. ^^^ The trial court struck several provisions of 
Kuzik's opposing affidavit and granted summary judgment for the town and 
police commission.^^^ 

On appeal, the court first noted that the trial court has broad discretion with 
respect to the admissibility of evidence and that this discretion extends to ruling 
on motions to strike affidavits that do not comply with summary judgment 
rules.^^^ In other words, the court observed, "affidavits in support of a motion for 
summaiy judgment must present admissible evidence that should follow 
substantially the same form as though the affiant were giving testimony in court 
in order to comply with the requirements of Trial Rule 56(E)."^^^ The court 
stated that the requirements of Rule 56(E) are mandatory, such that inadmissible 
information contained in summary judgment affidavits should be disregarded.^^^ 

The court held that the trial court properly struck numerous provisions of 
Kuzik's affidavits that did not constitute facts based on his personal knowledge; 
rather, the stricken provisions were speculative, conclusory and irrelevant. ^^"^ 

2. Unreliable Summary Judgment Evidence. — In InsureMax Insurance Co. 
V. Bice,^^^ the court affirmed the trial court's denial of summary judgment where 
the only evidence submitted by the movant could be disbelieved by a reasonable 
trier of fact.^^^ 

Following an automobile accident. Bice sued the owner of the responsible 
truck, Grahg, alleging Grahg's negligence caused the accident and Bice's 
resulting injuries.^^^ Grahg's insurer, InsureMax intervened and moved for 
summary judgment, arguing that Grahg was not the driver of the truck and that 
the truck had been taken without Grahg's permission.^^^ In support of the 
motion, InsureMax presented the deposition testimony of Grahg, as well as the 
affidavit of his aunt.^^^ 

The court held that summary judgment should not be entered where a 
reasonable factfinder could choose not to believe the movant's evidence.^^^ 
Moreover, the court concluded that the trial court should not "'base summary 
judgment solely on a party's self-serving affidavit, when evidence before the 
court raises a genuine issue as to the affiant's credibility. '"^^^ The court also 

279. Id. 

280. Id. at 263-64. 

281. Mat 265. 

282. Id. 

283. Id. 

284. Id. at 265-67. 

285. 879 N.E.2d 1 187 (Ind. Ct. App.), trans, denied, 891 N.E.2d 50 (Ind. 2008). 

286. /J. at 1190-91. 

287. /J. at 1189. 

288. Id. 

289. Id. 

290. Id. at 1 190 (citing McCullough v. Allen, 449 N.E.2d 1 168, 1 172 (Ind. Ct. App. 1983)). 

291. Id. (quoting McCullough, 449 N.E.2d at 1 172). 


observed that inconsistencies or evasive language in the movant's designated 
evidence justify the denial of summary judgment.^^^ 

The court concluded that Grahg's deposition was self-serving and that a 
reasonable trier of fact could choose not to believe his account.^^^ The court also 
concluded that the trier of fact could choose not to credit the affidavit submitted 
by Grahg's aunt, because she is related to him.^^"^ Accordingly, because a 
reasonable fact finder could choose to disbelieve the evidence designated by 
InsureMax in support of its summary judgment motion, the trial court did not err 
in denying summary judgment.^^^ 

K, Judgment on the Evidence 

In Swan Lake Holdings, LLC v. Hiles,^'^^ the court affirmed the trial court's 
denial of the defendant's Rule 50 motion for judgment on the evidence following 
the presentation of the plaintiffs case-in-chief in a premises liability action.^^^ 

Hiles was injured when rotten wood gave way on the roof of a structure 
owned by Swan Lake.^^^ Following Hiles' presentation of his case-in-chief, 
Swan Lake moved for judgment on the evidence pursuant to Rule 50.^^^ The trial 
court denied the motion, and the jury returned a verdict in favor of Hiles. ^^^ 

On appeal, the court reviewed the standard for granting a Rule 50 motion, 
i.e., the court must look "'only to evidence and reasonable inferences drawn most 
favorable to the nonmoving party and the motion should be granted only where 
there is no substantial evidence supporting an essential issue in the case.'"^^^ The 
court concluded that there was evidence presented, i.e., testimony that the wood 
supports were wet and unpainted for an extended period of time, which the jury 
could have used to infer that Swan Lake was on notice regarding the danger to 
Hiles.^^^ Accordingly, the court held that the trial court properly determined that 
there was sufficient evidence to support the essential elements of Hiles' claim 
and that judgment on the evidence pursuant to Rule 50 would be improper.^^^ 

292. Id. 

293. Id. 

294. /J. at 1190-91. 

295. Mat 1191. 

296. 888 N.E.2d 265 (Ind. Ct. App. 2008). 

297. Id. at 212. 

298. Mat 268. 

299. Id. 

300. Id. 

301 . Id. at 269 (quoting E. Chicago Police Dep't v. Bynum, 826 N.E.2d 22, 3 1 (Ind. Ct. App. 

302. Mat 271. 

303. Mat 272. 

902 INDIANA LAW REVIEW [Vol. 42:879 

L. Relief from Judgment 

In Bunch v. Himm,^^^ the court affirmed the trial court's grant of relief from 
a default order where the movant was able to demonstrate excusable neglect.^^^ 

As part of their divorce decree, Bunch was awarded sole custody of his 
children with Himm, who was ordered to pay child support.^^^ While Himm was 
serving in the U.S. Marine Corps and preparing for deployment to Iraq, Bunch 
filed a petition to modify the decree and increase Himm's weekly support 
obligations in light of her increased income during her active duty period.^^^ The 
trial court entered a default order entering Bunch's requested modifications after 
Himm and her counsel failed to appear for the hearing. ^^^ 

On appeal, the court observed that, to set aside a default judgment or order 
pursuant to Rule 60(B)( 1 ), the movant must demonstrate that the failure to appear 
resulted from excusable neglect and that the movant would have been able to 
present a meritorious defense.^^^ Because Himm had made arrangements to 
receive and respond to her mail and her failure to receive adequate notice of the 
hearing date was due to a breakdown in communications, the court concluded 
that the trial court did not abuse its discretion in determining that Himm's failure 
to attend the hearing was a result of excusable neglect.^ ^^ 

The court also noted that Himm's request for Rule 60(B)(1) relief required 
that she demonstrate a meritorious defense.^ ^ ^ "A meritorious defense is one that 
would lead to a different result if the case were tried on its merits. ^*^ A party 
need not demonstrate absolutely the existence of such a defense; rather, a prima 
facie showing of the defense is sufficient.^ *^ In this case, the court noted at least 
two meritorious defenses Himm could have raise, i.e.. Bunch' s petition to modify 
the divorce decree was not verified and that it failed to allege a substantial and 
continuing change in circumstances rendering the original decree 
unreasonable.^ ^"^ Accordingly, the court concluded the trial court properly 
exercised its discretion in setting aside the default order pursuant to Rule 

304. 879 N.E.2d 632 (Ind. Ct. App. 2008). 

305. Id. at 636-37. 

306. /J. at 633-34. 

307. /J. at 634. 

308. Id. 

309. Id. at 635. 

310. Id. at 636. 

311. Id. at 631. 

312. Id. 

313. Id. 

314. Id. 

315. Id. 


M. Motion to Correct Errors 

In Paulsen v. Malone,^^^ the court reversed the trial court' s grant of a motion 
to correct error.^^^ The defendant in a personal injury action filed a timely 
motion to correct errors following an adverse jury verdict.^^^ The trial court held 
a hearing and requested that the parties provide supplemental briefing for the 
court's consideration. ^^^ The parties complied and submitted supplemental 
briefing within twenty-four days of the hearing.^^^ The trial court granted the 
motion to correct errors twenty -two days later, which was forty-six days after the 
hearing.^^' Relying on the plain language of Rule 53.3(A), which requires that 
the thirty-day period in which the trial court must rule on a motion to correct 
errors begins when the motion is heard, and the fact that the trial court did not 
continue the hearing, the Indiana Court of Appeals concluded that, under Rule 
53.3(A), the motion to correct errors would be deemed denied if not ruled upon 
within thirty (30) days of the hearing.^^^ 

A^. Attorney Fees and Costs 

1. Costs Do Not Include Attorney 's Fees. — In Wiley v. McShane,^^^ the court 
reversed the trial court's dismissal of a will contest for the plaintiff's failure to 
post a bond in the amount set by the trial court.^^"^ The court concluded that the 
bond set by the trial court was intended to cover the estate's litigation expenses, 
e.g., deposition fees, court reporter costs and attorney's fees.^^^ However, as the 
court explained, the term "costs" is a term of art and must be given its specific 
legal meaning.^^^ Because "costs" did not include litigation expenses, including 
attorney's fees, the court remanded for a proper costs determination and 
reinstatement of the will contest.^^^ 

2. Frivolous or Groundless Litigation. — In Knowledge A-Z, Inc. v. Sentry 
Insurance, ^^^ the court affirmed the trial court's award of attorney's fees to the 
prevailing party under Indiana's "frivolous litigation statute."^^^ Although 
Indiana generally adheres to the "American Rule," whereby each party pays its 
own attorney's fees and costs, "[a] court may award attorney's fees to the 

316. 880 N.E.2d 312 (Ind. Ct. App. 2008). 

317. Mat 315. 

318. Mat 313. 

319. Id. 

320. Id. 

321. Id. 

322. Mat 314-15. 

323. 875 N.E.2d 273 (Ind. Ct. App. 2007). 

324. Id. at 278. 

325. Id. at 276-77. 

326. Id. at 276. 

327. Id. at 277. 

328. 891 N.E.2d 581 (Ind. Ct. App. 2008). 

329. Id. at 586; see also iND. CODE § 34-52- 1-1 (b)(2) (2008). 

904 INDIANA LAW REVIEW [Vol. 42:879 

prevailing party if the court finds that a party either continued to litigate after its 
'defense clearly became frivolous, unreasonable or groundless' or 'litigated the 
action in bad faith. '"^^^ The court further observed that "[a] defense is 
unreasonable if, based on the totality of the circumstances, including the law and 
facts known at the time, no reasonable attorney would consider it justified or 
worthy of litigation."^^^ Although the trial court did not enter specific findings 
of fact in connection with its order of attorney's fees, the defendant was trying 
to relitigate a matter already concluded by the trial court and affirmed by the 
appellate court; accordingly, the court concluded that the trial court did not abuse 
its discretion in awarding attorney's fees to the prevailing party.^^^ 

3. Wrongfully Entered Injunction. — In Bigley v. MSD of Wayne Township 
Schools, ^^^ the court affirmed the trial court's award of attorney's fees following 
the dissolution of a temporary restraining order that was not replaced by a 
preliminary inj unction. ^^"^ In accordance with Rule 65(C), the court reasoned that 
a party is entitled to recover attorney's fees incurred defending against a 
preliminary injunction as damages. ^^^ 

in. Amendments to Indiana Rules of Trial Procedure 

By order dated September 2007,^^^ the Indiana Supreme Court amended a 
number of Rules of Trial Procedure, including Rules 4.1 1, 26, 34, 37, 42, 55, 56, 
63, 72, 77, 79.1 and 80, as follows:^^^ 

1 . The court amended Rule 4. 1 1 to allow for return of service by electronic 
transmission, in addition to transmission by mail.^^^ 

2. The court amended Rule 26(A)(3) to include request for production of 
electronically stored information among the accepted methods of discovery.^^^ 

3. The court amended Rule 26(B)(1) concerning the general scope of 
permissible discovery by adding the following paragraph: 

The frequency or extent of use of the discovery methods otherwise 
permitted under these rules and by any local rule shall be limited by the 
court if it determines that: (i) the discovery sought is unreasonably 
cumulative or duplicative, or is obtainable from some other source that 
is more convenient, less burdensome, or less expensive; (ii) the party 

330. 891 N.E.2d at 585 (quoting IND. Code § 34-52- 1-1 (b)(2), (3) (2008)). 

331. W. at 586. 

332. Id. 

333. 881 N.E.2d 77 (Ind. Ct. App. 2008). 

334. /J. at 81-82. 

335. Id. 

336. Order Amending Indiana Rules of Trial Procedure, No. 94S00-0702-MS-49 (Ind. Sept. 
10, 2007). 

337. The Indiana Supreme Court also amended Trial Rules 60, 76, and 77 by order dated 
September 9, 2008. These amendments have been omitted from this Survey. 

338. Ind. TrialR. 4.11. 

339. Ind. TrialR. 26(A)(3). 


seeking discovery has had ample opportunity by discovery in the action 
to obtain the information sought or; (iii) the burden of expense of the 
proposed discovery outweighs its likely benefit, taking into account the 
needs of the case, the amount in controversy, the parties' resources, the 
importance of the issues at stake in the litigation, and the importance of 
the proposed discovery in resolving the issues. The court may act upon 
its own initiative after reasonable notice or pursuant to a motion under 
Rule 26(C);'^ 

4. The court amended Rule 26(B) by adding the following section: 
(5) Claims of Privilege or Protection. 

(a) Information withheld. When a party withholds information 
otherwise discoverable under these rules by claiming that it is privileged 
or subject to protection as trial preparation material, the party shall make 
the claim expressly and shall describe the nature of the documents, 
communications, or things not produced or disclosed in a manner that, 
without revealing information itself privileged or protected, will enable 
other parties to assess the applicability of the privilege or protection. 

(b) Information produced. If information is produced in discovery that 
is subject to a claim of privilege or protection as trial preparation 
material, the party making the claim may notify any party that received 
the information of the claim and the basis for it. After being notified, a 
party must promptly return, sequester, or destroy the specified 
information and any copies it has and may not use or disclose the 
information until the claim is resolved. A receiving party may promptly 
present the information to the court under seal for a determination of the 
claim. If the receiving party disclosed the information before being 
notified, it must take reasonable steps to retrieve it. The producing party 
must preserve the information until the claim is resolved.^"^^ 

5 . The court amended Rule 26(C) concerning protective orders by adding the 
following section (9): 

Upon motion by any party or by the person from whom discovery is 
sought, and for good cause shown, the court in which the action is 
pending or alternatively, on matters relating to a deposition, the court in 
the county where a deposition is being taken, may make any order which 
justice requires to protect a party or person from annoyance, 
embarrassment, oppression, or undue burden or expense, including one 
or more of the following: 

340. IND. Trial R. 26(B)(1). 

341. iND. Trial R. 26(B)(5). 

906 INDIANA LAW REVIEW [Vol. 42:879 

(9) that a party need not provide discovery of electronically stored 
information from sources that the party identifies as not reasonably 
accessible because of undue burden or cost. On motion to compel 
discovery or for a protective order, the party from whom discovery is 
sought must show that the information is not reasonably accessible 
because of undue burden or cost. If that showing is made, the court may 
nonetheless order discovery from such sources if the requesting party 
shows good cause. The court may specify conditions for the 

6. The court amended Rule 34 to include production of electronically stored 
information, as well as sound recordings, and images. ^"^^ 

7. The court also amended Rule 34(B): (a) to permit a party requesting 
production of electronically stored information to specify the form or forms of 
production; (b) to require the requesting party to state the form or forms it 
intends to use if the requesting party does not specify a particular form; and (c) 
to require that the responding party produce electronically stored information in 
a "reasonably usable" form if the requesting party does not specify a particular 

8. The court amended Rule 37 by adding section (E), which provides: "(E) 
Electronically stored information. Absent exceptional circumstances, a court 
may not impose sanctions under these rules on a party for failing to provide 
electronically stored information lost as a result of the routine, good faith 
operation of an electronic information system."^"^^ 

9. The court amended Rule 42 concerning consolidation to change a 
statutory reference from "IC 34-1-13-1" to "IC 34-35-1-1."^'^ 

10. The court amended Rule 55 to clarify that a party failing to plead or 
otherwise comply with procedural rules may be defaulted "by the court."^"^^ 

1 1 . The court amended Rule 63(E) concerning judge pro termpore to change 
a reference from "Rule 79(14)" to "Rule 79(P)."^^^ 

12. The court amended the final sentence of Rule 72(C) to read as follows: 

All motions and applications in the clerk's office for issuing process, 
including final process to enforce and execute judgments, and for other 
proceedings which do not require allowance or order of the court are 
grantable of course by the clerk; but the clerk's action may be suspended 
or altered or rescinded by the court upon cause shown. ^"^^ 

342. IND. Trial R. 26(C)(9). 

343. iND. Trial R. 34. 

344. Ind.Trl\lR. 34(B). 

345. iND. Trial R. 37(E). 

346. iND. Trial R. 42. 

347. Ind.Trl\lR. 55. 

348. iND. Trial R. 63(E). 

349. Ind.Trl\lR. 72(C). 


13. The court amended Rule 77(B) concerning court records by deleting the 
last paragraph, which discussed requirements for the chronological case 
summary. ^^° 

14. The court amended Rules 79.1(G)(1) and 79.1(H) to change a statutory 
reference from 'TC 33-11.6-7" to "IC 33-34-5-6."'^^ 

15. The court amended Rule 80(E) concerning comments to the bench, bar, 
and public by changing the mailing address for the Committee's Executive 
Secretary from "1 15 W. Washington Street, Suite 1080" to "30 South Meridian 
Street, Suite 500" and made the same change to Appendix B concerning 
Appearance by an Attorney in a Civil Case.^^^ 

350. IND. Trial R. 77(B). 

35 1 . iND. Trial R. 79. 1 (G)-(H). 

352. iND. Trial R. 80(B); Ind. Trial R. app. B. 

Indiana Constitutional Developments: 
Evolution on Individual Rights 

Jon Laramore' 

I. Decisions Relating to Individual Rights 

During the survey period, Indiana's appellate courts continued developing 
doctrine applying the Indiana Constitution on a number of topics. The Indiana 
Supreme Court issued significant opinions explaining the scope of the Open 
Courts Clause in article 1, section 12 and addressing the rights of accused 
persons under article 1, section 13. Both sections elaborate rights under the 
Indiana Constitution that go beyond rights extended by the United States 
Constitution.^ Also, the Indiana Court of Appeals issued a decision explaining 
the rights of students to an adequate education under article 8 (although the 
Indiana Supreme Court's grant of transfer in that case shifts the issue to the 
higher court)^ and another decision using the Ex Post Facto Clause to invalidate, 
on an as-applied basis, restrictions on residency for convicted sex offenders who 
have completed their sentences.^ Both courts continued to develop state 
constitutional doctrine on search and seizure and "multiple punishments" double 
jeopardy, expanding protections in both areas beyond those provided by the 
United States Constitution."^ These decisions show doctrinal advancement in 
some areas of individual rights guaranteed by the Indiana Constitution. 

A. The Open Courts Clause of Article 1, Section 12 

The Indiana Supreme Court used the Open Courts Clause of article 1 , section 
12 to invalidate a statute restricting prisoners from filing lawsuits in certain 
circumstances in Smith v. Department of Correction.^ The statute in question 
required trial courts to dismiss any civil lawsuit brought by a prisoner who 
previously filed three or more civil lawsuits that were dismissed as frivolous 
under the Frivolous Claims Act.^ The trial court in this case dismissed the 
prisoner's lawsuit, and the court of appeals affirmed, ruling that the state's 
interest in limiting frivolous lawsuits by prisoners outweighed a prisoner's right 
to file.^ 

* Partner, Baker & Daniels LLP. Former chief counsel to Governor Frank O'Bannon and 
Governor Joseph E. Keman and former adjunct professor, Indiana University School of 
Law — Indianapolis. 

1 . See infra Part LA, C. 

2. See Bonner ex rel Bonner v. Daniels, 885 N.E.2d 673 (Ind. Ct. App. 2008), trans, 
granted and aff'd, 907 N.E.2d 516 (Ind. 2009). 

3. See infra Part I.B, D. 

4. 5^^ m/ra Part I.F-G. 

5. 883 N.E.2d 802 (Ind. 2008). 

6. See P.L. 80-2004, § 6, codified at iND. CODE § 34-58-2-1 (2008). The Frivolous Claims 
Act is found at iND. CODE § 34-58-1-2 (2008). 

7. Smith, 883 N.E.2d at 805. 

910 INDIANA LAW REVIEW [Vol. 42:909 

In the 3-2 decision by Justice Boehm, the Indiana Supreme Court majority 
applied the Open Courts Clause, which states "[a] 11 courts shall be open and 
every person, for injury done him in his person, property, or reputation, shall 
have remedy by due course of law."^ The court found that, while cases in Indiana 
and other states have examined similar provisions, there is little history showing 
the framers' motivation or purpose for enacting the language.^ 

The majority in Smith based its decision largely on the language of the 
clause, stating that "as a matter of ordinary usage, the provision that remedy by 
due course of law is available to all is readily understood to mean, at a minimum, 
that to the extent the law provides a remedy for a wrong, the courts are available 
and accessible to grant relief."'^ The clause "demonstrates an embracing of the 
notion ... of an independent judiciary, and guarantees access to the courts to 
redress injuries to the extent the substantive law recognizes an actionable 
wrong."* ^ The court also recognized its prior decisions holding that the clause 
does not restrict the legislature' s power to alter, abolish, or condition remedies. *^ 

Applying this analysis, the majority invalidated the law.*^ It noted that many 
states and the federal government have imposed restrictions on prisoner lawsuits, 
but no jurisdiction had gone as far as Indiana' s total ban, finding that Indiana law 
"bars claims purely on the basis of the plaintiffs prior activity without regard to 
the merits of the claim presented."*"^ Even if the prisoner has a clearly 
redressable claim, such as a claim for theft of his property, the statute would bar 

Smith is consistent with the court's prior decisions applying section 12, and 
it also follows Indiana courts' penchant for construing prisoners' rights very 
narrowly.*^ In prior cases, the Indiana Supreme Court made clear that section 12 
did not restrict the General Assembly's right to alter the scope of substantive 
rights and of the remedies available.*^ But just as the court held in Smith, when 
the General Assembly has defined a right and provided a remedy, section 12 
requires that the courts be available to effectuate that remedy.*^ 

8. IND. Const, art. 1, § 12. 

9. 5w//;i, 883 N.E.2d at 807. 

10. Id. 

11. Id. 

12. Mat 808. 

13. /J. at 810. 

14. /J. at 809-10. 

15. /^. at 810. 

16. See, e.g., Israel v. Ind. Dep't of Corr., 868 N.E.2d 1 123, 1 124 (Ind. 2007) (holding that 
there is no judicial review of administrative decision affecting prisoner); Mcintosh v. Melroe Co., 
729 N.E.2d 972, 977 (Ind. 2000) (construing section 12 to allow legislative branch to define rights 
and remedies); Martin v. Richey, 711 N.E.2d 1273, 1282 (Ind. 1999) (holding that section 12 
invalidates, as applied, a statute precluding a plaintiff from obtaining a remedy permitted by the 
legislature for a wrong defined by the legislature). 

17. McIntosh,129 N.E.2dsit971-n. 

18. Martin, 711 N.E.2d at 1282. 


Chief Justice Shepard dissented, noting that the court's decision would lead 
to greater burdens on the judicial system and would therefore hinder other 
litigants' cases. ^^ Justice Sullivan also dissented, reasoning that invalidating the 
statute altogether was unnecessary and advocating instead an as-applied 
approach, which would create exceptions to a general ban for non-frivolous 
prisoner cases.^^ 

B. Right to Adequate Education Under Article 8 

The Indiana Supreme Court vacated the court of appeals' opinion in Bonner 
ex reL Bonner v. Daniels when it granted transfer, and the supreme court has now 
entered its opinion; however, the subject matter of the lawsuit is sufficiently 
important to merit discussion.^ ^ The lawsuit, brought by a group of public school 
parents on behalf of their children, alleges that the State has failed to fulfill its 
duty under the Indiana Constitution to provide an education "that equips them 
with the knowledge and skills they need to compete for productive employment, 
to pursue higher education, and to become responsible and informed citizens."^^ 
The lawsuit is based in part on the existing state academic standards and argues 
that Indiana provides insufficient resources to some students, guaranteeing that 
they will not be able to meet the standards already established by the State Board 
of Education and other authorities as measurements of adequate education.^^ 

The constitutional basis for the lawsuit is article 8, section 1, which states: 

Knowledge and learning, generally diffused throughout a community, 
being essential to the preservation of a free government; it shall be the 
duty of the General Assembly to encourage, by all suitable means, moral, 
intellectual, scientific, and agricultural improvement; and to provide, by 
law, for a general and uniform system of Common Schools, wherein 
tuition shall be without charge, and equally open to all.^"^ 

The complaint sought relief in the form of two declarations: 

That the Indiana Constitution imposes an enforceable duty on the 
General Assembly to provide a quality public education that prepares all 
children to function ... in society . . . ; and Indiana's current system of 
financing violates the Indiana Constitution, with the result that the class 
of affected students are not receiving their constitutionally guaranteed 

19. Smith, 883 N.E.2d at 81 1 (Shepard, C.J., dissenting), 

20. Id. (Sullivan, J., dissenting). 

21. 885 N.E.2d 673 (Ind. Ct. App. 2008), trans, granted, opinion vacated. No. 49S02-0809- 
CV-525 (Ind. Sept. 23, 2009) (unpublished), available at 
0926081ist.pdf. The Indiana Supreme Court ruled, in a decision after the Survey period, that the 
Indiana Constitution conveys no judicially enforceable right to any particular standard of 
educational quality. Bonner ex rel. Bonner v. Daniels, 907 N.E.2d 516 (Ind. 2009). 

22. Id. at 677. 

23. Id. 

24. Ind. Const, art. 8, § 1. 

912 INDIANA LAW REVIEW [Vol. 42:909 

right to education.^^ 

The students sued on behalf of a class, and the defendants were the Governor, the 
Superintendent of Public Instruction, and the State Board of Education.^^ 

The defendants first argued that the lawsuit raised no justiciable issue, at 
least not against the named defendants. ^^ They argued that the plaintiffs lacked 
standing because they could show no personal injury; that the complaint was not 
redressable because declaratory relief would not guarantee improvement in the 
students' status; and that the named defendants could not provide relief — only 
the General Assembly could.^^ They also argued that the constitutional language 
was so general that it provided no judicially manageable standards for 
determining whether the clause was violated or a remedy was adequate. ^^ The 
Indiana Court of Appeals, in a 2-1 opinion by Judge Riley, rejected each of these 

The court determined that the students had standing to obtain declaratory 
relief because the controversy clearly affected their legal rights and they had a 
substantial interest in the relief sought.^^ The court also ruled that declaratory 
relief was meaningful redress for the students' complaint.^ ^ The court could 
permissibly assume that, if the Judicial Department declared that the school 
funding formula was inadequate under the Indiana Constitution, action would be 
taken to provide a remedy without further need for coercive relief. ^^ The court 
also concluded that the defendants were proper, and the students did not have to 
sue the General Assembly.^^ The Governor and Superintendent, as members of 
the Education Roundtable, are responsible for making recommendations on 
education policy, and the State Board of Education is also charged with making 
education policy.^"^ Also, it is common to sue executive branch officials who are 
responsible for carrying out legislation alleged to be unconstitutional.^^ 

With regard to the substantive issue in the case, the court concluded that 
article 8 provides sufficient guidance for the courts to determine whether the 
General Assembly is meeting whatever duty it may have to provide free public 
education. "On numerous occasions Indiana courts have developed standards for 
enforcing constitutional provisions that are sparse and require further 
interpretation."^^ Indiana courts previously have applied the language of article 

25. Bonner, SS5N.E.2d at 679. 

26. Id. at 673. 

27. /J. at 681-87. 

28. Id. 

29. Id. at 687-88. 

30. /d at 683-84. 

31. Id. at 6S5. . 

32. Id. at 685-86. 

33. Id. at 687. 

34. Mat 686-87. 

35. Id. at 686. 

36. Id. at 688 (citing Boehm v. Town of St. John, 675 N.E.2d 318 (Ind. 1996), in which the 


8 in other contexts, never finding it so vague that it could not be interpreted.^^ 
In particular, the court found guidance in the history of article 8, concluding that 
''the evil to be addressed by what became [a]rticle [8] of our Constitution was a 
lack of education and the subsequent problem of illiteracy among Indiana's 
citizens."^^ The court also pointed out that many other states have addressed the 
adequacy of their school funding formulas under their state constitutions, some 
with constitutional language less clear that Indiana' s.^^ 

The court concluded that the case was justiciable and that the Indiana 
Constitution provided sufficient standards to allow the question to be 
adjudicated, stating ''we hold that [a]rticle [8] imposes a duty on the [s]tate to 
provide an education that equips students with the skill and knowledge enabling 
them to become productive members of society.'"^^ It further concluded, 

the State's constitutional duty necessarily must extend beyond mere 
reading, writing, and arithmetic. It also includes broad educational 
opportunities needed in today's society to prepare citizens for their role 
as participants and as potential competitors in today's marketplace of 

Judge Friedlander dissented, stating his position that the Constitution commits 
the adequacy of education solely to the legislature."^^ 

The Indiana Supreme Court' s grant of transfer nullifies the court of appeals' 
opinion. But the opinion exposes the arguments the State has raised in its 
attempt to avoid judicial entanglement in Indiana educational finance. As the 
court of appeals pointed out, a number of other states have endured protracted 
litigation over what funding formula and what level of funding is appropriate to 
meet the constitutional standard. "^^ Time will tell whether the Indiana Supreme 
Court views the justiciability issue in the same way as the court of appeals, what 
standard the supreme court might establish for educational adequacy, and 
whether this litigation will move forward to break constitutional ground in 

Indiana Supreme Court interpreted general language governing property tax assessment to require 
wholesale changes in assessment methodology). 

37. Id. at 689 (citing Nagy v. Evansville- Vanderburgh Sch. Corp., 844 N.E.2d 481, 484-85 
(Ind. 2006); State ex rel Clark v. Haworth, 23 N.E. 946, 947-48 (Ind. 1890); Robinson v. Schenck, 
1 N.E. 698, 705 (Ind. 1885)). 

38. Id. at 691 (quoting Nagy, 844 N.E.2d at 484). 

39. Id. at 692-93. The court pointed out that during the past ten years, "only eight states have 
refused to consider challenges similar to the case before us; whereas, seventeen states have 
adjudicated the claims." Id. at 692 (footnotes omitted). 

40. Id. at 694. 

41. /J. at 695. 

42. Id. (Friedlander, J., dissenting). 

43. Mat 693. 

914 INDIANA LAW REVIEW [Vol. 42:909 

C Rights of Individuals Accused of Crimes Under Article 1, Section 13 

Indiana courts continued to expand the scope of protections provided by 
article 1, section 13 in cases decided during the survey period. In Biddinger v. 
State,^"^ the Indiana Supreme Court addressed the right of a criminal defendant 
who pleads guilty to make a statement in allocution before sentencing."^^ 
Biddinger pleaded guilty to aggravated battery in connection with a shooting, and 
the plea agreement allowed the parties to argue their positions on sentencing. "^^ 

Biddinger offered witnesses on sentencing, then at the close of evidence 
offered to make a statement."^^ The trial judge did not allow the statement 
because Biddinger did not agree to be sworn as a witness or to be cross- 
examined."^^ Biddinger instead made a written offer of proof of what he would 
have said in allocution."^^ 

In a unanimous opinion by Justice Rucker, the Court ruled that after pleading 
guilty, a defendant who asks to make an unsworn statement should be permitted 
to do so.^° This ruling was based in part on article 1, section 13's provision that 
"the accused shall have the right ... to be heard by himself and counsel."^' The 
court noted "that the Indiana Constitution places a unique value upon the desire 
of an individual accused of a crime to speak out personally in the courtroom and 
state what in his mind constitutes a predicate for his innocence of the charges."^^ 
The court noted that a statute requires the trial judge to ask a defendant whether 
he wants to make an allocution after he has been convicted, but not when he has 
plead guilty (as Biddinger did).^^ The court ruled that when a defendant makes 
a request to allocute after pleading guilty, he has a right to do so.^"^ Moreover, 
because the allocution is not testimony, but "more in the nature of a closing 
argument," it is not subject to cross-examination.^^ Nevertheless, in this case the 
court found the trial court's denial of Biddinger' s allocution request harmless 
error because the allocution repeated information already before the trial court.^^ 

In another section 13 case, Vasquez v. State, ^^ the Indiana Supreme Court 
concluded — in part for constitutional reasons — that a defendant has a right to 
obtain testimony from a witness even though the witness was disclosed after the 

44. 868 N.E.2d 407 (Ind. 2007). 

45. Id. 

46. /«i. at409. 

47. Id. 

48. Id. 

49. /J. at 409-10. 

50. Id. at 412. 

51. Id. (quoting iND. CONST, art. 1, § 13). 

52. Id. (quoting Vicory v. State, 802 N.E.2d 426, 429 (Ind. 2004)). 

53. Id. (citing iND. CODE § 35-38-1-5 (2006)). 

54. Id. 

55. /J. at 413. 

56. Mat 412-13. 

57. 868 N.E.2d 473 (Ind. 2007). 


deadline set by the trial court and, indeed, after trial began.^^ Vasquez was being 
prosecuted for burglary, and on the first day of trial he informed his lawyer of a 
potential witness who would testify that he overheard others say that they would 
blame Vasquez for the burglary (an undercurrent in the opinion was Vasquez' s 
inability to communicate with his counsel, who spoke only English. )^^ When 
Vasquez' s attorney notified the trial court about the witness, the State objected 
and the trial court did not permit the witness to testify.^^ It was undisputed that 
the failure to disclose the witness was neither intentional nor designed to obtain 
unfair advantage. 

In a unanimous opinion by Justice Dickson, the court ruled that the witness 
should have been allowed to testify.^^ The witness's testimony was very 
important, and any prejudice to the State was slight and could have been cured 
by a "short continuance."^^ The court stated: "Indiana jurisprudence recognizes 
a strong presumption to allow defense testimony, even of late-disclosed 
witnesses: 'The most extreme sanction of witness exclusion should not be 
employed unless the defendant's breach has been purposeful or intentional or 
unless substantial and irreparable prejudice would result to the State. '"^^ The 
court emphasized the accused's rights under the Sixth Amendment and article 1, 
section 13 "to present evidence and to have a fair trial," stating they are "of 
immense importance. "^"^ 

The Indiana Court of Appeals also addressed section 13 in Caraway v. 
State, ^^ examining when the right to counsel attaches. Caraway, an adult, was 
caught in a sex act with a young child and taken to the police station for 
questioning.^^ While the appellate opinion is not specific about Caraway's 
mental abilities, it notes that he could not read and that police had to read back 
statements he dictated.^^ Months later, a police officer visited Caraway, who had 
not yet been charged, and persuaded him to sign an agreement that he would take 
a polygraph examination and that the results of the examination would be 
admissible in court.^^ Caraway was read Miranda warnings, but not until after 
he signed the agreement about the polygraph. ^^ 

Caraway's trial counsel moved to exclude the results of the polygraph test, 
arguing that he was never offered counsel before signing the polygraph 

58. M. at 477. 

59. M. at 474. 

60. Id. at 415. 

61. Id. at 411. 

62. Id. at 475-76. 

63. Id. at 476 (quoting Wiseheart v. State, 491 N.E.2d 985, 991 (Ind. 1986)). 

64. Id. at 411. 

65. 891 N.E.2d 122 (Ind. Ct. App. 2008), reh'g denied. 

66. Id. at m. 

67. Id. 

68. Id. at 124. Judicial opinions have restricted the admissibility of polygraph test results. 
See Owens v. State, 373 N.E.2d 913, 915 (Ind. App. 1978). 

69. Caraway, 891 N.E.2d at 124. 

9 1 6 INDIANA LAW REVIEW [Vol. 42:909 

agreement.^^ The court concluded that Caraway should have been offered 
counsel before the polygraph agreement was discussed.^* The court stated: 

Article [1], [s]ection 13 of the Indiana Constitution guarantees the right 
to counsel at any critical stage of the prosecution where counsel's 
absence might derogate from the accused's right to a fair trial; however, 
"the rights afforded under [s]ection 13 also attach prior to the filings of 
formal charges against the defendant. "^^ 

Although Caraway was not charged or arrested at the time the officer discussed 
the polygraph examination, he was entitled to be offered counsel before the 
polygraph agreement was discussed with him because it was such an important 
aspect of his right to a fair trial (in Sixth Amendment terms, a "critical stage").^^ 
The court's decision conflicts with Kochersperger v. State ^^ which examined a 
similar issue, but the State did not seek transfer in Caraway. 

D. Constitutional Decisions Relating to Restrictions on Sex Offenders 

The Indiana Court of Appeals applied Indiana constitutional principles to 
three cases involving restrictions on sex offenders, and the result was a mixed 
bag.^^ In Doe v. Town of Plainfield^^ the court approved a local ordinance 
excluding individuals whose names are on the Sex and Violent Offender Registry 
from public parks in Plainfield. The plaintiff, listed on the registry because of 
earlier child pornography convictions, frequently took his child to parks and 
recreation areas in Plainfield, but the ordinance precluded him from doing so any 
more.^^ The court rejected Doe's argument that his right to enter parks was 
protected by article 1 , section 1 of the Indiana Constitution, which describes 
inalienable rights including "life, liberty, and the pursuit of happiness."^^ 
Bypassing whether article 1, section 1 creates judicially enforceable rights at all, 
the court concluded that the provision does not protect "the right to enter public 

70. Id. 

71. Mat 126-27. 

72. Id. (quoting Hall v. State, 870 N.E.2d 449, 460 (Ind. Ct. App.), trans, denied, 878 N.E.2d 
213 (Ind. 2007)). 

73. Id. at 127. Judge Robb concurred, basing her decision on the Fifth Amendment. See id. 
at 128 (Robb, J., concurring). 

74. 725 N.E.2d 918 (Ind. Ct. App. 2000). 

75 . The court also invalidated a statute imposing a lifetime registration requirement on certain 
individuals, holding that it violated the ex post facto clause. Jensen v. State, 878 N.E.2d 400 (Ind. 
Ct. App. 2007), trans, granted, 891 N.E.2d 43 (Ind. 2008). The Indiana Supreme Court, in a 
decision after the Survey period, disagreed. Jensen v. State, 905 N.E.2d 384 (Ind. 2009). 

76. 893 N.E.2d 1124 (Ind. Ct. App. 2008). The Sex and Violent Offender Registry is 
established by iND. CODE § 36-2-13-5.5 (2007). 

77. Do^, 893N.E.2dat 1128. 

78. Mat 1132. 


parks for legitimate purposes."^^ The court also rejected Doe' s argument that the 
ordinance violated his right under article 1, section 12, which the court said 
"contains a substantive component requiring legislative enactments to be 
rationally related to a legitimate legislative goal."^^ Doe argued that excluding 
those on the registry from public parks is not rationally related to the goal of 
public protection because no evidence shows that any particular person on the 
registry is likely to re-offend. ^^ The court concluded that this argument did not 
support Doe's facial challenge to the ordinance because it did not foreclose 
constitutional application of the ordinance "in all instances. "^^ This approach 
may leave open the door for as-applied challenges by individuals listed on the 
registry who can prove that they pose little or no risk of re-offending. The court 
also rejected Doe's challenge under article 1, section 24, the Ex Post Facto 
clause of the Indiana Constitution.^^ The court found that the ordinance was not 
an impermissible ex post facto law because its primary intent was not punitive, 
but rather aimed mainly at public protection. ^"^ 

In State v. Pollard,^^ in contrast, the Indiana Court of Appeals invalidated a 
statute governing sex offenders as applied to Pollard. The statute precluded 
persons on the Sex and Violent Offender Registry from living within 1000 feet 
of a school, youth program center, or public park.^^ Pollard had lived at the same 
address, in a home he owned, for twenty years.^^ In 1997, he was convicted of 
committing a sex-related offense, and he was required to place his name on the 
registry. ^^ The statute prohibiting anyone on the registry from living within 1000 
feet of a school, youth program center, or public park was enacted in 2006,^^ long 
after Pollard bought his home and almost a decade after his conviction.^^ In 
2007, the State charged Pollard with violating the residency statute.^^ 

The Indiana Court of Appeals concluded that the statute was criminal in 
nature because it created a class D felony for someone on the registry to live 
within 1,000 feet of a school, youth program center, or public park.^^ It further 

79. M at 1 1 3 1 . The Indiana Court of Appeals previously has cast doubt on whether article 
1, section 1 contains any judicially enforceable rights. See Morrison v. Sadler, 821 N.E.2d 15, 31- 
32 (Ind. Ct. App. 2005). 

80. Do^, 893N.E.2datll32. 

81. Mat 1133. 

82. Id. 

83. /^. at 1136. 

84. Mat 1135-36. 

85. 886 N.E.2d 69 (Ind. Ct. App. 2008), trans, granted and rev'd, 908 N.E.2d 1 145 (Ind. 

86. iND. Code § 35-42-4-1 1 (2006). 

87. Pollard, 886 N.E.2d at 71. 

88. Id. 

89. Ind. Code § 35-42-4-1 1 (2006). 

90. Pollard, 886 N.E.2d at 71. 

91. Id. 

92. Mat 73-74. 

9 1 8 INDIANA LAW REVIEW [Vol. 42:909 

held that the effect of the statute was to "[increase] the penalty applied to 
affected sex offenders by preventing those offenders from residing and taking full 
advantage of their ownership rights in property acquired prior to conviction and 
prior to the imposition of the statute."^^ The court invalidated the statute as to 
Pollard and persons in similar circumstances because of the importance of 
property rights and the statute's retroactive restriction on property ownership in 
violation of article 1, section 24.^'* 

E. Article 1, Section 22* s Limits on Shielding Assets from Creditors 

Prime Mortgage USA, Inc. v. Nichols^^ addressed many issues arising from 
a shareholder dispute, including one issue of Indiana constitutional law. After 
the trial court awarded the plaintiff approximately $8 million in damages, she 
took a number of steps to collect her judgment, including garnishment orders.^^ 
The constitutional issue arose from an attempt to garnish a life insurance policy 
obtained by the corporation for its employee, who was also a judgment debtor in 
the case. Indiana Code section 27-1-12-17. 1 exempts such insurance policies, in 
their entirety, from creditors' claims. ^^ 

The constitutionality of this statute is suspect under article 1, section 22, 
which allows the legislature to enact laws "exempting a reasonable amount of 
property from seizure or sale" to allow a debtor "to enjoy the necessary comforts 
of life."^^ Unlimited exemptions from garnishment such as the one in this case 
are suspect.^^ "[WJhen the statute contains no limitation, our supreme court has 
put the burden on the debtor to demonstrate that the exemption fits within the 
'necessary comforts of life purpose of the Indiana Constitution. "'^°° Because the 
defendant made no effort to justify the unlimited nature of the exemption, the 
Indiana Court of Appeals remanded this portion of the case to the trial court for 
relevant evidence, concluding it was "not in a position to conclude that the 
claimed exemption is not reasonably necessary" or to determine "whether any or 
part of the value of the . . . insurance policy is sufficiently related to 
[Defendant's] enjoyment of the necessary comforts of life."^^^ 

F. Limits on Searches and Seizures Under Article 1, Section 11 
The Indiana Supreme Court applied federal and state constitutional principles 

93. Id. at 74. 

94. Id. at 75. 

95. 885 N.E.2d 628 (Ind. Ct. App. 2008). 

96. Id. at 666. 

97. See iND. CODE § 27-1-12-17.1 (2006). 

98. Id. at 670 (quoting iND. CONST, art. 1, § 22). 

99. Id. (citing Citizens Nat'l Bank of Evansville v. Foster, 668 N.E.2d 1236, 1242 (Ind. 

100. Id. at671 (quotingCitizens Nat'l Bank, 66SN.E.2dai 1242) (internal quotation omitted). 

101. Id. at 612. 


to invalidate a search in Campos v. State, ^^^ involving a roadside search after a 
traffic stop. The unanimous decision was written by Justice Boehm. An officer 
pulled over the car containing Campos and Santiago because it had been 
speeding. ^^^ The officer questioned the two occupants separately, and their 
stories did not match completely. ^^"^ 

After giving a written warning, the officer told them they could leave. *^^ But 
before they did so, he asked if they had anything illegal in the car.^^^ After they 
denied having anything illegal, the officer asked if he could search the car. 
"Santiago asked, Is it really necessary?' ^^^ [The officer] responded, 'Yes.'"^^^ 
While the car was being searched, Campos and Santiago were placed in the 
police car, where they were recorded on the car's video system, without their 
knowledge, making incriminating admissions. ^^^ The search of the car revealed 
cocaine. '^^ 

The court concluded that the officer had probable cause to detain the pair but 
lacked probable cause to search the car, so valid consent was necessary for the 
fruits of the search to be admissible.^^^ The court applied the federal standard to 
assess voluntariness of the consent, stating that the same standard applied under 
article 1, section 1 1 of the Indiana Constitution. ^^^ The court ruled that when the 
officer told Santiago that the search was "necessary," it was the same as saying 
that Santiago had no right to say no, making the consent involuntary and the 
search invalid. ^^^ 

The court found a separate violation of the Indiana Constitution under the 
doctrine of Pirtle v. State .^^"^ That case expands a suspect's rights beyond the 
guarantees of the U.S. Constitution, requiring that a suspect who is in custody be 
offered the opportunity to consult with a lawyer before being asked for consent 
to a search. ^^^ In this case, the State contended that Santiago was not in custody 
when he was asked whether he would consent to a search of the car.'^^ The court 
again relied on the officer's statement that consent was "necessary" to conclude 
that Pirtle applied because "no reasonable person would think that he had the 
right to leave or to decline [the officer' s] request" under those circumstances, and 

102. 885 N.E.2d 590 (Ind. 2008). 

103. /J. at 594. 

104. Id. at 595. 

105. Id. 

106. Id. 

107. Id. 

108. Id. 

109. /^. at 595-96. 

110. Id. Sit 596. 

111. Mat 598. 

112. 5^^/^. at 600. 

113. Id. 

1 14. Id. at 601-02 (citing Pirtle v. State, 323 N.E.2d 634, 640 (Ind. 1975)). 

115. See Pirtle, 323 N.E.2d at 640. 

1 16. Campos, 885 N.E.2d at 601. 

920 INDIANA LAW REVIEW [Vol. 42:909 

thus, Santiago was in custody.'*^ Because Santiago was not offered legal counsel 
before being asked to consent to the search, the search was invalid on that 
separate ground. ^'^ The court excluded the evidence found in the search and 
remanded for a new trial. ^'^ 

The court further concluded that Santiago's and Campos' s videotaped 
statements while in the police car were admissible. *^^ Because there was no 
interrogation, no Miranda warning had to be given, and the pair had no 
reasonable expectation of privacy within the police car.^^' Santiago and Campos 
offered no separate analysis under the Indiana Constitution as to the videotaped 
statements; so the court did not separately analyze that claim. ^^^ 

The Indiana Supreme Court addressed the retroactivity of a constitutional 
decision on searches in Membres v. State, ^^^ another drug case. Evidence against 
Membres was found in a search of the trash that he had placed outside for regular 
pickup. Membres argued that he should be protected by the holding governing 
trash searches in Litchfield v. State, ^^^ which was decided two weeks after the 
search that led to his conviction. ^^^ 

In a 3-2 decision, the court ruled that Litchfield did not apply retroactively 
to Membres' s> case.^^^ At the time of Membres' s search, the governing case was 
Moran v. State, ^^^ which allowed a search of trash left out at the curb on a totality 
of circumstances analysis. ^^^ The court stated that ''Litchfield expressly adopted 
the requirement of articulable individualized suspicion as an elaboration of 
Moran but did not overrule Moran.''^^^ Litchfield was consistent with Moran but 
not foreshadowed by Moran, and thus, Litchfield represented a new rule of 
criminal procedure. ^^^ 

The court recognized the general principle that new rules of criminal 
procedure are applied retroactively to cases not yet final (that is, when trial or 
appeal still is pending) when the new rule is announced. ^^* But Indiana is not 
required to follow this federal principle when the new rule arises from the state 

. . 1 -3-1 







Id. at 603. 




Id. at 602. 


Id. at 602 n.3. 


889 N.E.2d 265 (Ind. 2008), reh 'g denied. 


824 N.E.2d 356 (Ind. 2005). 


Membres, 889 N.E.2d at 268. 


Id. at 275. 


644 N.E.2d 536 (Ind. 1994). 


Membres, 889 N.E.2d at 269-70 (citing Moran, 644 N.E.2d at 539-40). 


/^. at 271. 




Id. at 21 1-72. 


Id. at 272. 


The majority, in a decision by Justice Boehm, distinguished cases involving 
the exclusionary rule for special retroactivity analysis. *^^ The exclusionary rule, 
the majority stated, is designed to deter law enforcement misconduct and not to 
ensure a fair trial or exclude unreliable evidence.^^"^ Because the purpose of the 
exclusionary rule is deterrence and does not affect the fairness of the trial, the 
majority ruled that a new rule of criminal procedure relating to the exclusionary 
rule need not be applied retroactively.*^^ 'The rule announced in Litchfield is 
designed to deter random intrusions into the privacy of all citizens. Retroactive 
application of that rule would not advance its purpose for the obvious reason that 
deterrence can operate only prospectively."*^^ 

The majority's ultimate application of these principles was as follows: 

Litchfield applies in Litchfield itself, and also any other cases in which 
substantially the same claim was raised before Litchfield was decided. 
But challenges to pvQ-Litchfield searches that did not raise Litchfield-Mke 
claims in the trial court before Litchfield was decided are governed by 
pr&-Litchfield doctrine" even if the cases were "not yet final at the time 
Litchfield was decided. *^^ 

Because the search in this case was reasonable under the Moran standard, the 
majority ruled that the evidence could be admitted. *^^ 

Justice Sullivan dissented, arguing that longstanding retroactivity principles 
required Litchfield to be applied retroactively. ^'^^ He also noted that, under the 
court' s analysis, Membres could have succeeded only if he had raised a Litchfield 
argument in the fourteen days between his arrest and the issuance of 
Litchfield — a time during which charges were not even filed against him.*'^^ 
Justice Rucker dissented in part and concurred in result, echoing Justice 
Sullivan's point that longstanding case law required retroactive application of 
Litchfield .^"^^ But Justice Rucker concluded that the search would be valid under 
L/rc/i//^/(i, justifying his concurrence.'"^^ 

The Indiana Court of Appeals applied the Indiana Constitution to several 
other searches during the survey period. In Wendt v. State, ^^^ the court addressed 
the good faith exception to the warrant requirement under article 1, section 11. 
A search of Wendt' s home, made pursuant to a warrant, turned up drugs and 

133. /J. at 273. 

134. Id. 

135. /J. at 274. 

136. Id. 

137. Id. 

138. Id. 2X215. 

139. Id. at 276 (Sullivan, J., dissenting). 

140. Id. at 217. 

141. Id. at 278-79 (Rucker, J., dissenting in part and concurring in result). 

142. /J. at 281. 

143. 876 N.E.2d 788 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 38 (Ind. 2008). 

922 INDIANA LAW REVIEW [Vol. 42:909 

paraphernalia. ^"^"^ Wendt argued that the warrant should not have been issued 
because the officer providing information to the issuing magistrate indicated that 
the confidential informant who was the source of the information had provided 
reliable information in similar situations previously. '"^^ In fact, the informant's 
prior information, while reliable, had come when the confidential informant was 
himself implicated in the crime, not when he was acting as a confidential 
informant. ^"^^ The court, in a unanimous opinion by Judge May, found that the 
officer providing the information for the warrant had misinformed the issuing 
magistrate, but not intentionally.^'*^ The court also approved application of a 
good faith exception under the Indiana Constitution based on both the similarity 
of the language in article 1, section 1 1 to the Fourth Amendment and the lack of 
"any compelling reason for rejecting" the Fourth Amendment good faith 

. IAS 


But the Indiana Court of Appeals used section 1 1 to find unreasonable the 
lengthy detention of a suspect prior to arrest in Buckley v. State .^"^^ Police 
suspected Buckley in a murder, followed his car when he left his home, and 
stopped him after he committed traffic infractions. ^^^ Police did not ticket him, 
but rather told him he was not free to leave until a detective arrived to question 
him.^^^ Police then took him to a police station, where he was kept for several 
hours before search warrants could be obtained, and his car was impounded. ^^^ 
Police found a hand gun in his car, and he was convicted of its illegal 
possession — not the murder. *^^ The court found these actions unreasonable in the 
context of the totality of circumstances under article 1 , section 1 1 and suppressed 
the gun.^^"* The court concluded that the officers lacked probable cause to arrest 
Buckley and that holding him for hours violated his rights. ^^^ Applying the 
Litchfield factors, the court concluded that, although police had reasonable 
suspicion Buckley had committed a murder, the degree of intrusion into 
Buckley's ordinary activities was "substantial" and law enforcement needs were 
minimal because there was no emergency. '^^ 

144. /^. at 789. 

145. Id. 

146. /^. at 791. 

147. Id. 

148. Id. at 790 (quoting Mers v. State, 482 N.E.2d 778, 783 (Ind. Ct. App. 1985) (also 
applying good faith exception under Indiana Constitution)); see Hopkins v. State, 582 N.E.2d 345, 
351 (Ind. 1991) (citing Mers with approval); see also United States v. Leon, 468 U.S. 897, 923 
(1984) (establishing good faith exception under the U.S. Constitution). 

149. 886 N.E.2d 10 (Ind. Ct. App. 2008). 

150. /J. at 13. 

151. Id. 

152. Id. 

153. Id. 

154. /^. atl6. 


156. Id. 


The court evaluated standing to contest a search under section 11 in Allen v. 
State, ^^^ in which Allen was convicted of murdering his mother and grandparents 
and burying them under concrete in the basement of the grandparents' home. 
After the murders, Allen lived in the home for several weeks and had keys to the 
residence, and he claimed that his privacy interest in the home was violated by 
the warrantless search that discovered the bodies. ^^^ Allen had no Fourth 
Amendment standing because the home was not his. ^^^ A defendant has standing 
to contest a search under section 11 if he establishes "ownership, control, 
possession, or interest in the premises searched or the property seized."^^^ In a 
unanimous opinion by Judge Crone, the court concluded that Allen had no 
standing to challenge the search because he had no legitimate possessory interest 
in the home — he lived there only because of his crime, which eliminated the 
lawful possessors. ^^^ Allen was a trespasser who obtained possession by illegal 
means, and thus lacked standing to challenge the search. 

In another standing case, Jackson v. State,^^^ the passenger in a traffic stop 
challenged the results of a search of the passenger compartment of the car, which 
led to his conviction for sale of cocaine. Applying standing language from 
Campos, ^^^ the Indiana Court of Appeals concluded that federal and state 
standing principles were identical in these circumstances, and "[wjhere the 
defendant offers sufficient evidence indicating that he has permission of the 
owner to use the vehicle, the defendant plainly has a reasonable expectation of 
privacy in the vehicle and standing to challenge the search of the vehicle."^^"^ In 
this case, there was no evidence indicating that Jackson lacked permission to be 
in the car, which belonged neither to him nor the driver. ^^^ Because it was 
uncontested that Jackson had a right to be in the car, the court concluded that he 
had standing to challenge the search. ^^^ The court concluded, however, that the 
search was a reasonable inventory search and did not suppress the evidence. ^^^ 

The Indiana Court of Appeals approved a search warrant although it was 
based on stale information in Mehring v. State }^^ Investigators linked Mehring 

157. 893 N.E.2d 1092 (Ind. Ct. App. 2008), trans, denied. 

158. Id. at 1095. 

159. Id. 

160. Peterson v. State, 674 N.E.2d 528, 534 (Ind. 1996). 

161. Allen, 893 N.E.2d at 1 100. 

162. 890 N.E.2d 1 1 (Ind. Ct. App. 2008). 

163. Campos v. State, 885 N.E.2d 590, 595 (Ind. 2008). 

164. Id. at 16 (quoting Campos, 885 N.E.2d at 598-99). 

165. /^. at 16-17. 

166. Id. at 17. 

1 67 . Id. dii\9. In the unanimous opinion by Judge Mathias, the court cautioned "that inventory 
searches performed at the scene [of the arrest] invite challenges. Inventory searches conducted at 
the impound lot by an officer assigned to such duties are greatly preferred to searches conducted 
at the scene, without a warrant, by the arresting officer." Id. (citation omitted). 

168. 884 N.E.2d 371, 373 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1222 (Ind. 2008). 

924 INDIANA LAW REVIEW [Vol. 42:909 

to child pornography, tracing web postings to his home computer. ^^^ Although 
he had moved since the initial determination that the child pornography was 
posted from his home computer, police obtained a warrant for Mehring's 
residence based on expert testimony that traffickers in child pornography kept 
images for long periods of time.^^^ In a 2-1 decision written by Judge 
Friedlander, the court determined that the warrant was valid despite the passage 
of ten months since the discovery of the information on which the warrant was 
based. ^^^ After a thorough Fourth Amendment analysis, the court stated that a 
"different analysis" must be applied under section 11 despite its similar 
wording. ^^^ The court concluded that 

the totality of the circumstances — including, the information contained 
in the [probable cause] affidavit, the nature of the crime, the nature of 
the items being sought, and the normal and common sense inferences 
regarding where one might keep such items — established a substantial 
basis to believe that there was a fair probability that evidence of child 
pornography would be found in Mehring's apartment. ^^^ 

In a different case, the court also found that two-week-old information from a 
reliable informant that drugs were being sold at a given location was not 
sufficiently stale to render it unreasonable as a basis for law enforcement 
examination of household trash, which led to a search warrant, arrest, and 
conviction. ^^"^ 

In McDermott v. State, ^^^ the defendant was standing in the middle of a street 
shouting incoherently at traffic. When police approached, he fled, eventually 
entering the unlocked front door of a home.^^^ He would not identify himself or 
provide identification, police did not know whether the home he entered was his, 
and they entered the home and ultimately subdued him with a taser and arrested 
him for resisting law enforcement, disorderly conduct, and public intoxication. ^^ '' 
McDermott argued that the officers' warrantless entry to his home was 
unreasonable under section 11.^^^ Emphasizing the importance of learning 
McDermott' s identity to protect public safety, the court concluded that their entry 

169. Mat 374. 

170. Id. 

171. /^. at 381. 

172. Id. 

173. Id. Judge Mathias dissented, stating first that the expert testimony that child 
pomographers retain their images for long periods of time was not corroborated or subject to cross- 
examination; second that law enforcement could easily have obtained corroboration by 
electronically eavesdropping on Mehring's computer; and third that there is little case law support 
for such lengthy delays before obtaining a warrant. Id. at 382-83 (Mathias, J., dissenting). 

174. Teague v. State, 891 N.E.2d 1121,1 130 (Ind. Ct. App. 2008). 

175. 877 N.E.2d 467, 469 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 39 (Ind. 2008). 

176. Mat 469-70. 

177. Mat 470. 

178. Id. at 411. 


into the home was reasonable and not in violation of section 11.^^^ In Rush v. 
State, ^^^ the court similarly approved warrantless entry into a home to investigate 
underage drinking, which was obvious based on neighbors' reports and conduct 
that could be observed from the street. 

The court rejected police actions at another party in King v. State, ^^^ where 
officers staged a roadblock to stop each person leaving the party. The court 
relied on State v. Gerschojfer,^^^ in which the Indiana Supreme Court established 
rules for drunk driving roadblocks under the Indiana Constitution. ^^^ The court 
rejected the roadblock because it was not established pursuant to a formal policy, 
used no neutral guidelines to determine which cars should be stopped, and was 
targeted at a specific group rather than the general public. ^^"^ Also, the court 
noted that there was no evidence presented at trial that the officers had perceived 
that anyone at the party consumed alcohol, further negating any purpose for the 
roadblock. ^^^ The court found not only that police conduct was not reasonable, 
but also that there was very little evidentiary basis in the record justifying any 
sort of police intrusion at all. The court rejected the evidence obtained at the 
roadblock showing that one driver was intoxicated and reversed his conviction. ^^^ 

The Indiana Court of Appeals also used the Indiana Constitution as a basis 
for rejecting an automobile search that occurred after a legitimate traffic stop, but 
with no reasonable suspicion that the driver had committed any other crime. ^^^ 
It also invalidated an automobile search conducted after an officer arrested the 
driver for operating while intoxicated, when the officer had no suspicion of any 
other crime. ^^^ It found that seeking identification from a passenger in a traffic 
stop is not unreasonable under article 1, section 11, using the Litchfield factors 
to conclude that the intrusion is minimal and law enforcement need was 
substantial because of the concern for officer safety. ^^^ 

179. Mat 473. 

180. 881 N.E.2d 46, 53 (Ind. Ct. App. 2008). 

181. 877 N.E.2d 518, 524 (Ind. Ct. App. 2007). 

182. 763 N.E.2d 960 (Ind. 2002). 

183. King, Hll N.E.2d at 521 (citing Gerschojfer, 763 N.E.2d 960). 

184. Id. at 522. 

185. Id. 

186. Id. diX525. 

187. Baniaga v. State, 891 N.E.2d 615, 620 (Ind. Ct. App. 2008). The officer admitted that 
he did not suspect the driver of drug use (he found drugs in his search); rather "he searched her 
vehicle because he was looking for '[a]nything. Anything at all. Just — you never know what you'll 
find.'" Id. 

188. State v. Parham, 875 N.E.2d 377, 380 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 
36 (Ind. 2008). The officer testified that he did not base the search on a concern for his safety. Id. 
at 379. 

189. Cade v. State, 872 N.E.2d 186, 188-89 (Ind. Ct. App.), trans, denied, 878 N.E.2d 218 
(Ind. 2007). 

926 INDIANA LAW REVIEW [Vol. 42:909 

G. Protection Against Double Jeopardy Under Article 1, Section 14 

Indiana's courts continued to develop their separate test, based on article 1, 
section 14, for "multiple punishments" double jeopardy.^^^ The first part of 
Indiana's test is the same as the federal "multiple punishments" test, addressing 
whether each crime for which a defendant is convicted contains at least one 
element not contained by any other crime for which the defendant was 
convicted. ^^* But Indiana' s test does not stop there. Rather, Indiana law contains 
an "actual evidence" test, examining whether each offense of which a defendant 
is convicted is proved by at least one fact not used to prove any other offense of 
which the defendant was convicted. To succeed on this claim, "a defendant must 
demonstrate a reasonable possibility that the evidentiary facts used by the fact- 
finder to establish the essential elements of one offense may also have been used 
to establish the essential elements of a second challenged offense." ^^^ 

The Indiana Supreme Court applied this test in Lee v. State, ^^^ in which a 
defendant had been convicted of burglary and armed robbery after forcing his 
way into an apartment, brandishing a gun, making threats, and demanding 
money. '^'^ Lee argued that the jury could have used his barging into the house to 
establish both the burglary and the substantial step toward armed robbery that 
supported his conviction on that charge. ^^^ 

In a unanimous opinion by Justice Boehm, the court noted that it "ha[d] 
decided several cases where there were separate facts to support two convictions, 
but the case was presented in a way that left a reasonable possibility that the jury 
used the same facts to establish both."^^^ But in other cases, the court did not 
find any violation of the "actual evidence" test when the charging information, 
jury instructions, arguments of counsel, or other factors showed that the State 
presented its case so that each charge was established by separate facts, even if 
the jury theoretically could have found that multiple charges were established by 
the same f acts. ^^^ 

In Lee, the court ruled that it was likely that the jury used different facts to 
convict Lee of each offense, basing its conclusion in part on "the fact that the 
prosecutor highlighted these specific facts as she reviewed the elements of each 
crime in her closing argument."^^^ These arguments established that "the 

190. See Richardson v. State, 717 N.E.2d 32, 49-50 (Ind. 1999) (explaining separate test). 

191. See Blockburger v. United States, 284 U.S. 299, 302 (1932) (establishing federal test). 

192. Richardson, 111 N.E.2d at 53. Indiana courts have done little to explain the significance 
of the word "essential" in this test. In application, the word "essential" appears to be superfluous. 

193. 892 N.E.2d 1231 (Ind. 2008). 

194. Mat 1234-35. 

195. Mat 1235. 

196. Id. (citing Bradley v. State, 867 N.E.2d 1282 (Ind. 2007); Lundberg v. State, 728 N.E.2d 
852 (Ind. 2000); Guffey v. State, 717 N.E.2d 103 (Ind. 1999)). 

197. Id. at 1236 (citing Redman v. State, 743 N.E.2d 263 (Ind. 2001); Griffin v. State, 717 
N.E.2d 73 (Ind. 1999)). 

198. Id. 


burglary was complete when Lee barged into the home, but the attempted armed 
robbery was just beginning." ^^^ The court pointed out that "more deliberate 
prosecution of multiple offenses would avoid these double jeopardy 
problems."^°° If prosecutors make clear in charging instruments, instructions, and 
closing arguments which facts are intended to prove which offenses, the double 
jeopardy problem will seldom exist. 

Prosecutors took this advice to heart in at least two cases during the survey 
period, where the Indiana Court of Appeals rejected double jeopardy arguments 
because careful prosecutors clearly separated the evidence supporting one 
conviction from evidence supporting another. In Hardley v. State ^^^ the Indiana 
Court of Appeals affirmed convictions of confinement and battery because the 
charging instrument clearly stated that the confinement charge was based on 
Hardley ' s holding the victim down while the battery charge was based on striking 
her with his fists. Similarly, in Storey v. State,^^^ the Indiana Court of Appeals 
affirmed a conviction for possession of methamphetamine with intent to deliver 
and another conviction of manufacture of methamphetamine. At trial, the 
prosecutor used a quantity of unfinished methamphetamine to support the 
conviction for manufacturing and a quantity of finished methamphetamine to 
support the conviction of possession.^^^ "It is evident to us that the State 
carefully parsed the evidence pertaining to both the possession and 
manufacturing offenses," the Court stated.^^"^ "In doing so, the State set forth 
independent evidence that Storey (1) possessed methamphetamine in excess of 
three grams with the intent to deliver and (2) manufactured methamphetamine in 
excess of three grams."^°^ This appeal was Storey's second based on the same 
incident. His first conviction was reversed on Fifth Amendment grounds.^^^ 
Ironically, Storey's co-defendant had certain convictions reversed on appeal 
because of double jeopardy violations, and the prosecution in Storey's retrial 
heeded the advice in the co-defendant's appellate decision that "the State may 
have been able to support dual convictions by carefully parsing the evidence at 

199. Id. 

200. Id. at 1237. 

201. 893 N.E.2d 1 140, 1 142-43 (Ind. Ct. App. 2008), trans, granted and ajf'd in part, 905 
N.E.2d 399 (Ind. 2009). Senior Judge Patrick Sullivan dissented on the double jeopardy issue, 
arguing that the state did not sufficiently separate the facts supporting the charges and that there was 
"a reasonable possibility" under Richardson v. State, 111 N.E.2d 32 (Ind. 1999), that the jury used 
the same evidence to convict of two crimes. Hardley, 893 N.E.2d at 1 147-48. The supreme court 
opinion on transfer left this holding undisturbed but addressed an important sentencing issue. 

202. 875 N.E.2d 243, 250 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 35 (Ind. 2008). 

203. /^. at 248. 

204. Mat 250. 

205. Id. 

206. Storey v. State, 830 N.E.2d 1011, 1022 (Ind. Ct. App. 2005), aff'd, 875 N.E.2d 243 (Ind. 
Ct. App. 2007), trans, denied, 891 N.E.2d 35 (Ind. 2008). 

207. Storey, 875 N.E.2d at 248 (quoting Caron v. State, 824 N.E.2d 745, 754 n.6 (Ind. Ct. 

928 INDIANA LAW REVIEW [Vol. 42:909 

The Indiana Court of Appeals vacated certain convictions during the survey 
period as failing the "same evidence" test. In Williams v. State, ^^^ the court ruled 
that the same evidence — the fact that Williams presented a stolen and fraudulent 
check for a bank to negotiate — supported convictions of both forgery and 
attempted theft. The court therefore reversed the conviction on the lesser 
offense, attempted theft.^^^ A second case, also called Williams v. State^^^ 
presented a more complicated fact pattern and convictions of attempted rape, 
criminal confinement resulting in serious bodily injury, and battery resulting in 
serious bodily injury .^^' After a thorough analysis of the facts proved at trial. 
Judge Darden's opinion concludes that it was unlikely the jury used the same 
facts to support the convictions for attempted rape and battery, but that there was 
"a reasonable probability . . . that the same evidentiary facts the jury used to 
establish his commission of these two offenses were also used to establish the 
essential elements of the third offense — criminal confinement. "^^^ The State 
failed to establish that the force used to accomplish the attempted rape and 
criminal confinement was different than the force used to commit the battery. 
The court therefore reversed the criminal confinement conviction.^^^ In Smith v. 
State, ^^'^ the Indiana Court of Appeals applied the "same evidence" test sua 
sponte to reverse a criminal conviction arising from an attempted jail escape.^^^ 
The court found it "improper for the State to rely on evidence of the same injury 
to sustain a conviction for both class A felony robbery and class B felony 
aggravated battery."^^^ The State presented evidence of only one injury, and as 
a result, "there is a reasonable possibility the jury used the same evidence to 
establish the essential injury elements of both the elevated robbery charge and 
the aggravated battery charge."^^ '' The court remanded with instructions to enter 
judgment on the robbery charge as a C felony, not elevated for the injury.^^^ 

The Indiana Court of Appeals rejected double-jeopardy arguments under the 
State Constitution in several cases where proof of distinct acts occurred. In 
Moore v. State, ^^^ the court rejected a double jeopardy argument relating to rape 
and criminal deviate conduct. The court concluded that Moore's pre-trial guilty 
plea to battery could not be used "to deprive the State of the opportunity to fully 

App. 2005). 

208. 892 N.E.2d 666, 669 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1228 (Ind. 2008). 

209. Id.\see Richardson v. State, 717 N.E.2d 32, 55 (Ind. 1999) (reasoning that vacating the 
lesser conviction is the proper remedy). 

210. 889 N.E.2d 1274 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1225 (Ind. 2008). 

211. /^. at 1277. 

212. Id. at 1280 (internal quotations omitted). 

213. Id. 

214. 881 N.E.2d 1040 (Ind. Ct. App. 2008). 

215. Mat 1047. 

216. /J. at 1048. 

217. Id. 

218. Id. 

219. 882 N.E.2d 788 (Ind. Ct. App. 2008). 


prosecute, or to determine which charges will, or will not, be pursued against 
him."^^^ In other words, a defendant cannot manufacture a multiple-punishments 
double-jeopardy problem by pleading guilty to a lesser included offense. The 
court also rejected his argument for reversal based on the contention that his 
convictions of rape and criminal deviate conduct were based on the same use of 
force that supported the battery conviction.^^^ The court found evidence of 
separate force supporting each of the three convictions.^^^ The court rejected 
double-jeopardy arguments as to six counts of forgery and twenty-one counts of 
practicing nursing without a license in Lohmiller v. State,^^^ concluding that 
Lohmiller's signatures on twenty-seven different documents were each separate 
acts supporting different convictions.^^"^ Similarly in Rawson v. State, ^^^ the court 
affirmed convictions for attempted aggravated battery, intimidation, and criminal 
recklessness, concluding that the intimidation charge was proved by Rawson' s 
brandishing a gun, the aggravated battery conviction was proved by his firing the 
gun, and the criminal recklessness conviction was supported by his separately 
firing a gun in the direction of another victim. ^^^ 

H. Issues of Sentencing and Proportionality 

During the survey period, both the Indiana Supreme Court and Indiana Court 
of Appeals revised criminal sentences under authority derived from article 7, 
section 4 of the Indiana Constitution. Some of these cases are analyzed in 
Professor Schumm's article on developments in Indiana criminal law, also 
appearing in this issue of the Indiana Law Review ?^^ 

Manigault v. State^^^ applied the provision of article 1, section 16 requiring 
sentencing proportional to the offense. Manigault was convicted of possession 
of cocaine within 1,000 feet of a family housing complex, a B felony. ^^^ He 
challenged the sentence, arguing that if he had merely possessed cocaine he 
would have been guilty of only a class D felony; so he argued that he was 
punished disproportionately for the same crime.^^^ The Indiana Court of Appeals 

220. Mat 793. 

221. Mat 795. 

222. M. at 794-95. 

223. 884 N.E.2d 903, 914 (Ind. Ct. App. 2008). 

224. Id.\see also Bennett v. State, 883 N.E.2d 888, 893 (Ind. Ct. App. 2008) (convictions of 
three counts of child molesting supported by evidence of three separate incidents), trans, denied. 

225. 865 N.E.2d 1049, 1054-56 (Ind. Ct. App.), trans, denied, 878 N.E.2d 206 (Ind. 2007). 

226. Id. at 1055; see also Baltimore v. State, 878 N.E.2d 253, 260-61 (Ind. Ct. App. 2007) 
(convictions of burglary resulting in bodily injury and sexual battery supported by evidence of two 
separate touchings), trans, denied, 891 N.E.2d 38 (Ind. 2008). 

227 . See Joel M . Schumm, Recent Developments in Indiana Criminal Law and Procedure, 42 
Ind. L. Rev. 937 (2009). 

228. 881 N.E.2d 679 (Ind. Ct. App. 2008). 

229. M. at 684. 

230. Id. at 688. 

930 INDIANA LAW REVIEW [Vol. 42:909 

ruled unanimously that there was no violation of the Proportionality Clause 
because the State was required to prove additional facts to elevate the offense to 
class B.^^^ 

/. Free Expression Under Article 1, Section 9 

The prior article on Indiana constitutional law discussed the Indiana Court 
of Appeals' opinion in A.B. v. State, which held that a student's derogatory 
comments about her principal on the MySpace social networking site was 
protected speech under article 1, section 9}^^ On transfer, the Indiana Supreme 
Court also reversed the student's juvenile adjudication, but not based on 
constitutional rights.^^^ Rather, the court concluded that the student's post did 
not meet the statutory requirement that it be intended to **harass, annoy, or alarm 
another person" because it was posted on a private portion of the website, and the 
court could discern no intent to communicate the message to the principal. ^^"^ 

In Anderson v. State, ^^^ the Indiana Court of Appeals affirmed a conviction 
for disorderly conduct over a challenge that the defendant' s speech was protected 
political speech under article 1, section 9. The defendant made profane and 
angry comments directed at police officers who removed him from a tanning 
booth at the request of management after he failed to leave when his time 
expired, and he continued those comments even after being escorted out of the 
business. ^^^ The court concluded that these comments were not political 
comments directed at the arresting officers, but rather were comments on his own 
behavior that interfered with the ability of police to fulfill their duties.^^^ 

/. Mental Illness and Capital Punishment 
The Indiana Supreme Court' s decision in Overstreet v. State addressed when 

231. Id. 

232. Jon Laramore, Indiana Constitutional Developments: Incremental Change, 41 IND. L. 
Rev. 923, 928-29 (2008) (citing A.B. v. State, 863 N.E.2d 1212 (Ind. Ct. App. 2007), trans, 
granted and rev'd, 885 N.E.2d 1223 (Ind. 2008)). 

233. A.B. V. State, 885 N.E.2d 1223, 1227-28 (Ind. 2008). 

234. Id. at 1227. The court noted that the record contained little information about the 
operation of MySpace, and the court did independent research to discern its operation, particularly 
with regard to which portions of the website are private. In the opinion. Justice Dickson wrote: 

The Commentary to Canon 3B of the Indiana Code of Judicial Conduct advises: "A 
judge must not independently investigate facts in a case and must consider only the 
evidence presented." Notwithstanding this directive, in order to facilitate understanding 
of the facts and application of relevant legal principles, this opinion includes 
information regarding the operation and use of MySpace from identified sources outside 
the trial record. 
Id. at 1224. 

235. 881 N.E.2d 86, 91-92 (Ind. Ct. App. 2008). 

236. /J. at 88-89. 

237. Mat 90. 


severe mental illness can bar a death-sentenced prisoner's execution under the 
U.S. and Indiana constitutions.^^^ Although the U.S. Constitution prohibits 
execution of one who is "insane," the law has insufficiently developed exactly 
who fits within that definition. ^^^ Overstreet suffered from severe, documented 
mental illness, including some type of schizophrenia.^"^^ The illness caused 
hallucinations and illusions, and Overstreet "heard voices" of devils and 

In the opinion by Justice Rucker, the court nevertheless found that 
Overstreet' s condition did not satisfy the federal test.^"^^ Although he "suffers 
from a severe, documented mental illness . . . [that] is a psychotic disorder that 
is the source of gross delusions," the delusions did not prevent him "from 
comprehending the meaning and purpose of the punishment to which he has been 

The court also analyzed the case under the Indiana Constitution, which 
prohibits "cruel and unusual punishments" and requires that penalties be 
proportionate to the nature of the offense.^'*'^ The court recited that the Indiana 
Constitution requires a different analysis than federal provisions and that it may 
provide additional protections. ^"^^ 

In this portion of the opinion. Justice Rucker wrote for himself only, adopting 
the "logic and underlying rationale" of Atkins v. Virginia,^"^^ the U.S. Supreme 
Court case prohibiting the execution of persons who were mentally retarded. ^"^^ 
Justice Rucker stated his belief that severe mental illness indicates diminished 
capacity to understand and process information, to communicate, and to learn and 
engage in logical reasoning and impulse control.^"^^ These reasons supported 
prohibiting execution of those with mental retardation and should similarly 
prohibit execution of those with severe mental illness. Justice Rucker wrote.^"^^ 
He found "no principled distinction" between the reasons for not executing 
mentally retarded persons and the reasons for not executing mentally ill 
persons.^^^ No other justices agreed with Justice Rucker' s analysis, and they 
"vote[d] to affirm the judgment" sustaining Overstreet' s conviction and death 
sentence against post-conviction challenge.^^^ 

238. 877 N.E.2d 144 (Ind. 2007), cert, denied, 129 S. Ct. 458 (2008). 

239. Id. at 172 (citing Ford v. Wainwright, 477 U.S. 399, 410 (1986)). 

240. /^. at 172-73. 

241. /J. at 173. 

242. Id. 

243. Id. (quoting Panetti v. Quarterman, 551 U.S. 930, 960 (2007)). 

244. Ind. Const, art. 1, § 16. 

245. Overstreet, Sll N.E.2d at 174. 

246. 536 U.S. 304 (2002). 

247. Overstreet, %11 N.E.2d at 175. 

248. Id. 

249. Id. 

250. Id. 

25 1 . Id. K short opinion by Chief Justice Shepard, speaking for the other justices, stated that 

932 INDIANA LAW REVIEW [Vol. 42:909 

n. Decisions Relating to Governmental Structure and Powers 

A. Exhausting Administrative Remedies in Constitutional Challenges 

The Indiana Court of Appeals examined whether exhaustion of 
administrative remedies was required to challenge the constitutionality of an 
agency' s rule in LHT Capital, LLC v. Indiana Horse Racing Commissions^ The 
case arose in the context of transfer of ownership of a pari-mutuel race track by 
LHT to another entity.^^^ During the time period before the Horse Racing 
Commission was to approve the license transfer as required by statute, the 
Commission adopted an emergency rule stating that in considering whether to 
grant a request to transfer ownership of a horse racing track "the commission will 
consider the extent to which the state would share in any monetary payment to 
or economic benefit realized by the person divesting the ownership interest. "^^"^ 
LHT asserted in the appeal that the Commission requested a payment of $15 
million to the State as a condition of approving the sale.^^^ 

At the administrative hearing on the transfer application, LHT did not raise 
the constitutionality of the rule.^^^ On appeal, LHT stated that the Commission's 
counsel indicated before the hearing that the Commission would not entertain a 
challenge to the rule's constitutionality, but there was no record support for that 
assertion. ^^^ In its petition for judicial review of the Commission's 
decision — which approved the transfer conditioned upon payment to the State of 
$9 million, a $9 million charitable contribution, and a $10 million investment in 
a private business — LHT alleged that the rule was void for vagueness, violated 
separation of powers principles, went beyond the Commission's jurisdiction, and 
was an unconstitutional taking.^^^ 

The Indiana Court of Appeals ruled that the trial court lacked jurisdiction 
over the petition for judicial review because LHT had not exhausted its 
administrative remedies, and exhaustion is a jurisdictional prerequisite.^^^ 
Because LHT failed to raise the constitutionality of the rule before the 

the issue already had been decided adversely to Overstreet in Matheney v. State, 833 N.E.2d 454 
(Ind. 2005), and Baird v. State, 831 N.E.2d 109 (Ind. 2005). Overstreet, %11 N.E.2d at 176. 
Justice Boehm then wrote separately to state his view that those cases did not decide the issue 
Overstreet presented, but that he believed the Indiana Constitution's protections in this area 
coincided with those of the U.S. Constitution, and thus gave Overstreet no relief. Id. at 177-78. 

252. 891 N.E.2d 646 (Ind. Ct. App. 2008), trans, denied. 

253. Id. at 649. 

254. Id. at 648-49 (quoting 71 iND. Admin. Code § 1 l-l-13(d) (2006)). 

255. Mat 650. 

256. Mat 651. 

257. M. at650n.4. 

258. Id. at 651. 

259. M. at 656-57. 


Commission, its failure to exhaust precluded judicial review of the question.^^^ 
The court also concluded that LHT's failure to exhaust was not excused.^^^ The 
court rejected LHT's argument that exhaustion would have been futile because 
no evidence in the record supported any argument that the Commission would 
not have taken the argument seriously. ^^^ LHT's failure to exhaust also was not 
excused because the Commission lacked authority to address constitutional 
issues.^^^ The court noted that even when a party complains that a statute is 
unconstitutional and the agency lacks authority to address the question, 
exhaustion still may be required to resolve the case on other grounds, make a 
factual record, or develop a record of the agency's position.^^"^ The court noted 
that the cases excusing exhaustion on constitutional questions were declaratory 
judgment actions, not petitions for judicial review of actions the agency already 
took.^^^ In this case, the court found that LHT negotiated an agreement with the 
Commission to obtain quick action on license transfer to facilitate installation of 
slot machines at the race track and did not raise the constitutional question to 
avoid disrupting the settlement.^^^ LHT "accepted the benefits of its agreement," 
then tried to challenge the settlement on judicial review after benefiting from 
it.^^^ Stating that it might have reached a different conclusion if LHT had sought 
declaratory relief before any administrative hearing was held, the court affirmed 
dismissal of the judicial review action because LHT did not exhaust 
administrative remedies on the constitutional question it raised.^^^ 

B. Division of Powers Under Article 3 

The Indiana Supreme Court addressed division of powers in Clark County 
Council V. Donahue,^^^ where judges sought a declaratory judgment indicating 
what the county council could lawfully do with supplemental adult probation 
fees. The law requires judges to charge a user fee to persons on probation.^^^ 
The same statute specifies that the fees are to be placed in each county's 

260. Id. at 656. 

261. Id. 

262. Id. at 654. LHT alleged that the Commission's general counsel indicated that the 
Commission would not entertain a constitutional challenge, but that allegation was unsupported by 
any record evidence. Id. at 650 n.4. 

263. Id. at 654. 

264. Id. In this case, for example, the Commission might have determined not to enforce its 
rule or to do so only minimally. 

265. Id. at 655-56 (distinguishing cases that involve declaratory judgments from the case at 

266. Id. at 656. 

267. Id. 

268. Id. 

269. 873 N.E.2d 1038 (Ind. 2007), reh'g denied. 

270. iND. Code § 35-38-2-l(b) (2008). 

934 INDIANA LAW REVIEW [Vol. 42:909 

"supplemental adult probation services fund."^^^ The county council argued that 
it could use the fund without participation by the judges in where the funds were 
used and that the funds could be used for purposes including, but not limited to, 
probation services. ^^^ In contrast, the judges argued that judges have the 
responsibility to determine how the fund is to be spent. ^^^ 

The court found the answer in the statute, which it interpreted to require the 
fund to be spent only for supplemental or new probation services and increases 
or expansions of existing probation services.^^"^ The court concluded that 
"constitutional due process and separation of functions considerations point to 
this result."^^^ The court continued, "[p]robation users' fees are imposed on 
persons convicted of crimes. The Due Process Clause of the U.S. Constitution 
and analogous protections under the Indiana Constitution limit the amount and 
circumstances under which probation users' fees and other conditions may be 
imposed on criminal defendants. "^^^ If ongoing court and probation operations 
were dependent upon the fees, courts might be (or appear) tempted to convict 
more people to raise more revenue, a violation of due process and analogous state 

C. Due Course of Law (Article 7, Section 12) and Equal Privileges 
and Immunities (Article 1, Section 23) 

As usual during the survey period, a small number of cases raised challenges 
to statutes under the Due Course of Law Clause in article 1, section 12 and the 
Equal Privileges and Immunities Clause in article 1, section 23, but they failed 
to meet the high standard the courts have set for such challenges to succeed. The 
Indiana Supreme Court rejected an equal privileges challenge under the Worker' s 
Compensation Act (Act) in Brown v. Decatur County Memorial Hospital }^^ The 
court ruled that, under the Act, a medical provider obtaining compensation for 
treating a patient was not entitled to interest on his claim because the Act did not 
provide for interest.^^^ The court then rejected the provider's claim that denying 
him interest violated the Equal Privileges and Immunities Clause because other 
medical providers were entitled to interest when they sued in court.^^^ The court 
found that providers obtaining payment within the worker' s compensation system 
were different than other medical providers; so, it was permissible for the 

271. Id. § 35-38-2-l(f). 

272. Donahue, 873 N.E.2d at 1039-40. 

273. Id. at 1040. 

274. Id. at 1041 (construing IND. CODE § 35-38-2-l(f), (h) (2008)). 

275. /J. at 1042. 

276. Id. 

277. Id. 

278. 892 N.E.2d 642 (Ind. 2008). 

279. Mat 649-50. 

280. Mat 651. 


legislature to treat them differently by not providing for interest.^^^ Those 
treating patients eligible for worker's compensation are guaranteed that their 
claims will be paid, while other medical providers "may or may not receive 
payment for services rendered," justifying different treatment. ^^^ 

A plaintiff challenged provisions of the Occupational Diseases Act on equal 
privileges and immunities grounds in Roberts v. ACandS, Inc}^^ The worker's 
compensation claim was made by the widow of an insulator who died from 
asbestos-related illness.^^"^ She sued multiple parties, and some settled by making 
payments.^^^ ACandS, Roberts's direct employer, then moved to dismiss the 
worker's compensation claim against it because, under Indiana Code section 22- 
3-7-36, when an employee obtains payment for an injury from a third party, the 
employer's obligation under the worker's compensation system ceases.^^^ The 
court found that the statute violated neither article 1, section 12 nor article 1, 
section 23.^^^ The plaintiff challenged the statute as applied to her, claiming that 
it created two subclasses, employees injured through no fault of their own and 
employees injured at least in part by the actions of their employers, and denied 
full compensation to the second group.^^^ The court rejected this contention, 
holding that it is no violation to allow fault to be apportioned to the employer 
even though no compensation is forthcoming from the employer because of the 
Act^^^. Rather, it held that the worker's compensation system is not fault-based, 
and "[t]he humanitarian purpose of these acts is to provide workers with an 
expeditious and adequate remedy, not a complete remedy."^^^ Thus, it is 
permissible as part of the overall, no-fault worker's compensation system to 
eliminate one source of payment (the employer) when the employee opts to 
pursue relief through different channels. 

The court also rejected a section 12 challenge, made on an as-applied basis, 
contending that the law unreasonably and arbitrarily burdened the plaintiff's 
ability to obtain "a complete tort remedy. "^^^ Rather, section 12 does not specify 
any particular remedy, but only guarantees a right to pursue judicially any 
remedy that the General Assembly may have prescribed for a given harm.^^^ 

Adding to the lengthy list of cases applying article 1, section 12 in the 
medical malpractice context is the Indiana Supreme Court's decision in 

281. Id. 

282. Id. 

283. 873 N.E.2d 1055 (Ind. Ct. App. 2007). 

284. Id. at 1057. 

285. Id. at 1057-58. 

286. Id. at 1058 (citing iND. CODE § 22-3-7-36 (2006)). 

287. Id. at 1060-63 (discussing the Privileges and Immunities Clause and the Open Courts 

288. Mat 1060. 

289. Mat 1062. 

290. Id. 

291. Id 

292. Id. (citing Cantrell v. Morris, 849 N.E.2d 488, 499 (Ind. 2006)). 

936 INDIANA LAW REVIEW [Vol. 42:909 

Brinkman v. Beuter?^^ The Indiana Supreme Court has ruled that the two-year, 
occurrence-based medical malpractice statute of limitations is facially 
constitutional but may be unconstitutional as-applied in certain cases where strict 
application would deny a plaintiff the remedies otherwise guaranteed by law.^^"^ 
This principle makes applying the statute of limitations fact sensitive. In 
Brinkman, the plaintiff had a difficulty pregnancy, delivered a healthy baby in 
1995, and shortly thereafter suffered from eclampsia and its symptoms, including 
pain and seizures.^^^ She was advised to avoid another pregnancy.^^^ In 2000 she 
became pregnant again, and her new treating physician told her that her medical 
treatment in 1995 had been improper and she should not have been counseled to 
refrain from having children.^^^ She then sued for malpractice. The Indiana 
Supreme Court ruled that her lawsuit was untimely.^^^ The statute of limitations 
began to run in 1995, and she was well aware of her symptoms at that time and 
could have obtained additional medical and legal opinions. ^^^ Unlike cases where 
the illness had a long latency and could not be detected until after the statute of 
limitations had expired, the Brinkmans were aware of the facts and symptoms in 
1995, and nothing prevented them from investigating and filing suit at that 

In re Creation of South-West Lake Maxinkuckee Conservancy District 
included several challenges to the establishment of this district to provide sewage 
treatment, most about whether various procedural requirements for establishing 
the district were met.^^^ The intervenor challenging the district also argued that 
his rights under article 1, section 12 were violated because he was not given an 
opportunity to opt out of the district, while others were.^^^ He argued that 
allowing some to opt out precluded them from being heard on whether they 
should be part of the district, violating the provision of section 12 stating that 
"every person, for injury done to him in his person, property, or reputation, shall 
have remedy by due course [of] law."^^^ The court rejected this claim because 
it failed to disclose that a full hearing had been held at which all with interests 
could be heard and those with similar interests were treated similarly.^^"^ 

293. 879 N.E.2d 549 (Ind. 2008). Many of the cases applying section 12 in the medical 
malpractice context are discussed in the opinion at 553-54. 

294. Id. at 554 (citing Martin v. Richey, 711 N.E.2d 1273 (Ind. 1999); Van Dusen v. Stotts, 
712N.E.2d491(Ind. 1999)). 

295. /^. at 551. 

296. Id. 

297. /J. at 552. 

298. Mat 554-55. 

299. Id. 

300. Id. 

301. 875 N.E.2d 222 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 40 (Ind. 2008). 

302. /^. at 233. 

303. Id. (quoting iND. CONST, art. 1, § 12). 

304. /J. at 233-34. 

Recent Developments in Indiana 
Criminal Law and Procedure 

Joel M. Schumm* 

The General Assembly and Indiana's appellate courts confronted several 
significant issues during the survey period October 1, 2007, to September 30, 
2008. The General Assembly created new crimes, altered penalties for existing 
crimes, and saw a couple of new laws struck down by federal judges. Sentencing 
issues assumed less prominence than in recent years on the dockets of the 
supreme court and court of appeals. A wide range of other issues received some 
play, including bail, interpreters, online crimes against children, plea agreements, 
and probation. This Survey seeks not only to summarize the significant 
legislation and court opinions but also to offer some perspective on their likely 
future impact. 

I. Legislative Developments 

Although property tax relief dominated the 2008 short session of the General 
Assembly,^ several bills affecting criminal law and procedure were also enacted. 
A few appeared to be in response to recent judicial decisions, while others 
appeared grounded in broader societal concerns, usually creating new offenses 
or increasing the penalty for existing offenses. Two of these new bills were 
found unconstitutional by federal judges before taking effect. 

A. New Offenses 

The General Assembly created the new offense of sexual communication 
with a child under fourteen, which is defined as the knowing or intentional 
communication concerning sexual activity with a child less than fourteen "with 
the intent to gratify the sexual desires of the person."^ The base offense is a 
Class B misdemeanor, but is enhanced to a Class A misdemeanor if committed 
via a computer.^ Jn addition, individuals with prior convictions for a variety of 
sex offenses, or who have been found to be a sexually violent predator, can no 
longer use social networking websites, instant messaging, or chat room programs 
that the offender knows allows access to children under age eighteen.'^ The 

* Clinical Professor of Law, Indiana University School of Law — Indianapolis. B.A., 1992, 
Ohio Wesleyan University. M.A., 1994, University of Cincinnati. J.D., 1998, Indiana University 
School of Law — Indianapolis. 

1. See Another Job Still Undone, INDIANAPOUS STAR, Mar. 12, 2008, at 8. 

2. IND. Code § 35-42-4-13 (2008). 

3 . Id. The court of appeals has previously remarked that more severe treatment of offenses 
committed online versus face-to-face was "somewhat troubling" on its face, but found no 
proportionality violation because of the great deference given to the legislature, which "may have 
deemed that use of the internet may expose Indiana children to dangers that require a greater 
vigilance by society, or that use of the internet lessens inhibitions." Laughner v. State, 769 N.E.2d 
1147, 1156 (Ind. Ct. App. 2002). 

4. See iND. Code § 35-42-4-12 (2008). 

938 INDIANA LAW REVIEW [Vol. 42:937 

offense is a Class A misdemeanor for the first offense or a Class D felony if the 
defendant has a prior conviction for the same offense.^ 

Outside the realm of sex and the Internet, the General Assembly also enacted 
new offenses for: failing to report a dead body (within three hours of finding a 
body under various "suspicious or unusual circumstances");^ inmate fraud, when 
a prisoner obtains or attempts to obtain money through misrepresentations;^ 
disarming a law enforcement officer;^ and possession of looted property.^ The 
legislature also expanded the duties of drivers (and now passengers) involved in 
accidents) to seek help in the event of an accident. ^° Finally, the invasion of 
privacy statute^ ^ was amended to include violations of no-contact orders on 
defendants in lawful detention'^ and no-contact orders imposed as a condition of 
an executed sentence. ^^ 

B. Enhanced Penalties 

The General Assembly also enhanced penalties for several existing offenses. 
The penalty for operating a vehicle while intoxicated may now be enhanced to 
a Class C felony if the defendant has a prior conviction for operating while 
intoxicated resulting in death or serious bodily injury. ^"^ Birth certificate fraud 
may now be charged as a D felony if the person makes a false or fraudulent 
statement regarding the birth certificate; alters, counterfeits, or mutilates a birth 
certificate; or uses the same.^^ Persons under twenty-one now face a Class C 
misdemeanor — rather than an infraction — if they make a false statement or 
present false identification in the quest to procure an alcoholic beverage.*^ 
Adults similarly face greater penalties for recklessly or knowingly furnishing 
alcohol to a minor, which is a Class B misdemeanor for a first offense, a Class 

5. Id. 

6. Id. § 35-45-19-3. 

7. Id. § 35-43-5-20. 

8. Id. ^ 35-44-3-3.5. The base offense is a Class C felony. It is elevated to a Class B felony 
if the officer is seriously injured or a Class A felony if the officer dies or if the officer is seriously 
injured and the officer's firearm is taken. Id. 

9. See IND. Code § 14-21-1-36 (Supp. 2008). The offense is a Class D felony but can be 
enhanced to a Class C felony if the cost to carry out an archeological investigation on the site 
damaged to obtain the looted property is at least $100,000. Id. 

10. /J. §§9-26-1-1,9-26-1-1.5. 

11. iND. Code § 35-46-1-15.1 (2008). 

12. Id. § 35-46-1-15.1(12) (referencing Ind. Code § 35-33-8-3.2 (2008)). 

13. Id. § 35-46-1-15.1(13) (referencing Ind. Code § 35-38-1-30) (2008)). This amendment 
appears to be in response to recent supreme court cases holding that felony statutes do not authorize 
the imposition of a no-contact order as part of an executed sentence. See, e.g., Jarrett v. State, 829 
N.E.2d 930, 932 (Ind. 2005); Laux v. State, 821 N.E.2d 816, 819 (Ind. 2005). 

14. See Ind. Code § 9-30-5-3 (Supp. 2008). 

15. See Ind. Code § 16-37-1-12 (2008). 

16. Ind. Code § 7.1-5-7-1 (Supp. 2008). 

2009] CRIMINAL LAW 939 

A misdemeanor for any subsequent offense, and a Class D felony if the alcohol 
is the proximate cause of serious bodily injury or death to any person. ^^ Finally, 
in stark contrast to the usual trend of escalating criminal penalties, an 
environmental permit statute was amended to reduce the penalty for tampering 
with records, monitoring devices, or monitoring data from a Class D felony to a 
Class B misdemeanor.^^ 

In addition to these changes, two amendments could also lead to longer 
sentences. The list of statutory aggravating circumstances was expanded to 
encompass crimes committed when the defendant knew or should have known 
the victim was suffering from a disability. ^^ The statute limiting the imposition 
of consecutive sentences committed as part of the same criminal episode to the 
next higher level felony^^ was amended to add two new offenses to the list of 
exemptions: A person who operates a vehicle while intoxicated causing serious 
bodily injury to another person or who commits resisting law enforcement as a 
felony can face unlimited consecutive sentences.^^ 

C. Flexibility for Probation 

Continuing the trend of allowing trial courts latitude in dealing with 
probation, the General Assembly amended Indiana Code section 35-38-2-3 to 
make clear that trial courts can impose one or more sanctions on probationers 
who violate conditions of probation.^^ This was likely in response to the court 
of appeals' s opinion in Prewitt v. State (Prewitt 7),^^ which held that trial courts 
did not have the authority in revocation hearings both to execute a portion of a 
previously executed sentence and to modify conditions of probation.^'* Even 
before the legislative change, however, the Indiana Supreme Court had held 
otherwise, emphasizing the importance of "creative and case-specific sentences," 
which serve "the public interest by giving judges the ability to order sentences 
they deem to be most effective and appropriate for individual defendants who 
violate probation."^^ 

D. Reduced Credit Time for ''Credit Restricted Felons" 

Before June 30, 2008, most defendants served one-half of their term of 
imprisonment based on long-standing statutory provisions that allow for good 
time credit. Defendants imprisoned for a crime or in jail awaiting trial are 

17. Id. §7.1-5-7-8. 

18. Id. § 13-30-10-1. 

19. IND. Code § 35-38-1-7.1(7) (2008). 

20. Id. 35-50-l-2(c). 

21. Id. § 35-50-l-2(a)(15) & (16). 

22. Id. § 35-38-2-3. 

23. 865 N.E.2d 669 (Ind. Ct. App.), vacated by 878 N.E.2d 184 (Ind. 2007). 

24. Id. at 672. 

25. Prewitt v. State {Prewitt II), 878 N.E.2d 184, 187 (Ind. 2007). 

940 INDIANA LAW REVIEW [Vol. 42:937 

generally assigned to Class l}^ Such a person could be reassigned to Class n or 
in if he or she violates certain rules of the department of correction or the penal 
facility.^^ Such reassignments could have a significant effect on the length of a 
person's incarceration; defendants in Class I earn one day of credit for each day 
of credit confined, those in Class n earn one day for every two days confined, 
and those in Class HI receive no credit time.^^ 

House Enrolled Act 1271 dramatically changed credit time statutes for 
"persons convicted after June 30, 2008."^^ That legislation created a new 
category of defendants known as "[c]redit restricted felon[s]."^^ This category 
includes defendants (1) at least twenty-one years old who are convicted of child 
molesting involving sexual intercourse or deviate sexual conduct involving a 
child under the age of twelve; (2) convicted of child molesting resulting in 
serious bodily injury or death; or (3) convicted of murder (a) while committing 
or attempting to commit child molesting, (b) of a victim of a sex crime for which 
the person was convicted, or (c) of a victim known to be a witness against the 
defendant in a prosecution for a sex crime if the murder was committed to 
prevent that person from testifying.^ ^ 

Credit restricted felons may not be assigned to Class I or n but instead are 
initially assigned to a newly created Class IV.^^ By virtue of this assignment, the 
person "earns (1) day of credit time for every six (6) days the person is 
imprisoned for a crime or confined awaiting trial or sentencing."^^ If a class IV 
defendant violates correctional rules, he or she may be assigned to Class HI and 
earn no credit time.^'^ A credit restricted felon may never be assigned to Class I 

or n.^^ 

Although legislatures generally have very broad authority in assigning 
penalties for an offense,^^ this new statute likely runs afoul of the prohibition on 
ex post facto laws as applied to those who committed offenses before June 30, 

26. IND. Code § 35-50-6-4(a) (2008). 

27. Id. § 35-50-6-4(c). 

28. Id. § 35-50-6-3. 

29. See H.E.A. 1271, 1 15th Leg. 2d Reg. Sess. (Ind. 2008). 

30. iND. Code §35-41-1-5.5 (2008). 

31. Id. 

32. Id. § 35-50-6-4(b). 

33. Id. § 35-50-6-3(d). 

34. Id. §§ 35-50-6-4(d), -6-3(c). 

35. Id. § 35-50-6-4(b). 

36. Federal precedent imposes a nearly impossible burden in challenging a non-capital 
sentence as excessive under the Eighth Amendment. See generally Ewing v. California, 538 U.S. 
1 1 (2003). In rare circumstances, Indiana courts have found penalties disproportionate under article 
1, section 16 of the Indiana Constitution. See, e.g., Connor v. State, 626 N.E.2d 803 (Ind. 1993) 
(holding that sentence for dealing fake marijuana cannot exceed sentence for dealing actual 
marijuana); Poling v. State, 853 N.E.2d 1270, 1276 (Ind. Ct. App. 2006) (finding a section 18 
violation when "one defendant can receive a harsher sentence than another for the very same 

2009] CRIMEsTAL LAW 941 

2008.^^ The focus of the Ex Post Facto Clause is the time a crime "was 
committed."^^ States may not enact laws that impose ^'additional punishment to 
that then prescribed."^^ The purpose of this provision is to give "fair warning" 
of the effect of criminal laws "and permit individuals to rely on their meaning 
until expHcitly changed.'"^^ 

"[E]ven if a statute merely alters penal provisions accorded by the grace of 
the legislature, it violates the Clause if it is both retrospective and more onerous 
than the law in effect on the date of the offense.'"^^ In Weaver v. Graham,^^ the 
Court found a change in Florida statutes providing for "gain time" credit for good 
conduct in prison violated the Ex Post Facto Clause."^^ The pre- 1979 version of 
the statute awarded five, ten, or fifteen days per month as "gain time for good 
conduct.""^"^ Legislation passed in 1978, effective January 1, 1979, changed the 
formula, reducing those credits to only three, six, or nine days per month as gain- 
time credit. "^^ The petitioner, who pleaded guilty to a crime that occurred on 
January 3 1 , 1976,"^^ successfully argued this reduction in gain-time credit violated 
the Ex Post Facto Clause. "^^ The Court reasoned the new law "substantially 
alter[ed] the consequences attached to a crime already completed, and therefore 
change[d] the quantum of punishment.""^^ Put another way, the amended statute 
constricted the opportunity "to earn early release, and thereby ma[de] more 
onerous the punishment for crimes committed before its enactment.""^^ 

H.E.A. 1271, like the statutory amendment at issue in Weaver, is both 
retrospective and more onerous than the previous statutes. Under the pre-2008 
statutory scheme, all defendants began in Class I and remained there unless they 
committed a violation of correctional facility rules. ^^ They earned one day of 
credit for each day served, which meant they served fifty percent of their 
sentence.^^ For example, if an advisory sentence of thirty years for a Class A 
felony was imposed, the defendant would serve an actual sentence of fifteen 
years. Under the amended statutory scheme, however, defendants convicted of 

37. U.S. Const, art. 1, § 10. 

38. Weaver v. Graham, 450 U.S. 24, 28 (1981). 

39. Id. (string citation omitted); accord Cal. Dep't of Corr. v. Morales, 514 U.S. 499, 504, 
506 n.3 (1995) (reiterating that laws may not "increase[] the penalty by which a crime is 

40. Weaver, 450 U.S. at 28-29. 

41. /J. at 30-31. 

42. 450 U.S. 24(1981). 

43. Id. 

44. Id. at 26. 

45. Id. at 26-27. 

46. Id. at 26. 

47. See generally id. 

48. Id. at 33 (quotation omitted). 

49. Id. at 36. 

50. IND. Code § 35-50-6-4(a) (2007). 

51. See id. §35-50-6-3. 

942 INDIANA LAW REVIEW [Vol. 42:937 

an offense that renders them a "credit restricted felon" begin in a newly created 
Class IV through which they earn one day of credit for every six days served.^^ 
Thus, a defendant who receives a thirty year sentence would be required to serve 
more than twenty-five and a half years. Just as in Weaver, the new statute 
constricts the opportunity "to earn early release, and thereby makes more onerous 
the punishment for crimes committed before its enactment."^^ 

E. Unconstitutional Before Taking Effect 

Finally, two pieces of legislation were declared unconstitutional by different 
federal judges before the bills even took effect. Chief Judge Hamilton entered 
a declaratory judgment against amendments to Indiana Code section 1 l-8-8-8(b), 
which would have required registered sex offenders and violent offenders no 
longer on probation or parole to "consent to the search of their personal 
computers or devices with internet capability at any time" and "consent to 
installation on the same devices, at their expense, of hardware or software to 
monitor their internet use."^"^ Although felons are often "prohibited from 
possessing guns, voting, and holding certain professional positions,"^^ this 
legislation went considerably further by violating the Fourth Amendment 
protection of one's home.^^ "Unlike registering public information or working 
in particular professions, the right to privacy in one's home and personal effects 
is fundamental."^^ 

Days later. Judge Barker granted summary judgment in favor of a group of 
booksellers and artists who challenged amendments to Indiana Code section 23- 
1-55-2, which would have required any entity intending to sell "sexually explicit 
materials" to register with the secretary of state and "provide a statement 
detailing the types of materials that the person intends to offer for sale or sell."^^ 
The registration would have been a matter of public record; the secretary of state 
would have been required to notify local officials of registrants; and registrants 
would have been required to pay a fee.^^ Finally, the bill defined sexually 
explicit materials broadly, including those "harmful to minors (as described in 

52. IND. Code §§ 35-50-6-3, -4(a) (2008). 

53. 450 U.S. at 35-36. The proper remedy would be to declare the new statute 
unconstitutional as applied to defendants who commit offenses on or before June 30, 2008. Id. at 
36 (noting that "severable provisions which are not ex post facto may still be applied"). 

54. Doe V. Prosecutor, 566 F. Supp. 2d 862, 865 (S.D. Ind. 2008). 

55. Mat 882. 

56. See id. at 883. 

57. Id. This case did not include a challenge to those same restrictions for defendants on 
probation or parole, and this would be a much steeper hill to climb in light of the diminished liberty 
interests of probationers and parolees. See Harris v. State, 836 N.E.2d 267, 276 (Ind. Ct. App. 
2005) ("Restricting a child molester's access to [the Internet] serves to protect the public and 
prevent future criminal activity."). 

58. See Big Hat Books v. Prosecutors, 565 F. Supp. 2d 981 (S.D. Ind. 2008). 

59. Id. at 985. 

2009] CRIMEsf AL LAW 943 

IC 35-49-2-2), even if the product or service is not intended to be used by or 
offered to a minor."^^ The court concluded the bill unduly burdened First 
Amendment rights and was unconstitutionally vague and overbroad.^^ As to the 
final point, the court aptly described the overbreadth of the statute's reach: a 
"romance novel sold at a drugstore, a magazine offering sex advice in a grocery 
store checkout line, an R-rated DVD sold by a video rental shop, a collection of 
old Playboy magazines sold by a widow at a garage sale."^^ This reach was 
found "constitutionally disproportionate to the stated aim of the statute to provide 
a community 'heads-up' upon the opening of 'adult bookstore-type 
businesses. '"^^ 

n. Sentencing Appeals on the Decline 

Last year's survey included the caption, "Sentencing: Still the Main 
Event"^"^ — and with good reason. The year was marked by the landmark 
Anglemyer opinion,^^ which made clear that sentencing statements are still 
required, and included a variety of other sentencing claims and reductions under 
Indiana Appellate Rule 7(B).^^ Although the appellate courts issued scores of 
sentencing opinions again this year, those numbers appear to be declining and 
will likely not rebound as plea agreements around the state increasingly include 
sentencing waivers.^^ 

A. Waiving the Right to Appeal a Sentence 

In Childress v. State,^^ the supreme court made clear that defendants who 
plead guilty have a right to appeal their sentence if the trial court exercised any 
discretion.^^ This included plea agreements with a cap or range of years and even 
plea agreements that included a set term of years but allowed discretion in where 
the sentence would be served.^^ Largely in response to that decision, prosecutors 

60. Id. 

61. /^. at 999. 

62. /^. at 998. 

63. Id. 2X999. 

64. Joel M , Schumm, Recent Developments in Indiana Criminal Law and Procedure, 4 1 IND. 
L. Rev. 955, 960 (2008) [hereinafter Schumm I]. 

65. Id. at 962-63 (discussing Anglemyer v. State, 868 N.E.2d 482 (Ind. 2007)). 

66. Mat 964-73. 

67. The numbers may well decline for another reason, which was not resolved during the 
survey period. In McCullough v. State, 888 N.E.2d 1272 (Ind. Ct. App. 2008), vacated, 900 N.E.2d 
745 (Ind. 2009), a divided court of appeals concluded the State can cross-appeal a sentence as 
inappropriate when the defendant makes a sentencing challenge on appeal. 

68. 848 N.E.2d 1073 (Ind. 2006). 

69. Id. at 1079. 

70. See generally Joel M. Schumm, Recent Developments in Indiana Criminal Law and 
Procedure, 40 iNfD. L. REV. 789, 799-801 (2007) [hereinafter Schumm II]. 

944 INDIANA LAW REVIEW [Vol. 42:937 

began including sentencing waiver provisions in plea agreements'^ As discussed 
in last year's survey, the first appellate challenge to a waiver provision proved 
fruitless, as the court of appeals concluded such agreements are contractual in 
nature and permissible in federal court'^ This survey period, the issue reached 
the Indiana Supreme Court. In Creech v. StateJ'^ the court addressed the 
propriety and effect of the following provision of a plea agreement: 

I understand that I have a right to appeal my sentence if there is an open 
plea. An open plea is an agreement which leaves my sentence to the 
Judge's discretion. I hereby waive my right to appeal my sentence so 
long as the Judge sentences me within the terms of my plea agreement.^"^ 

The court concluded such provisions are enforceable; defendants may 
prospectively waive the right to appeal a sentence. ^^ Defendants may later 
challenge a plea as coerced or unintelligent in a post-conviction proceeding, and 
a plea agreement may not waive the right to pursue post-conviction relief. ^^ 
However, trial courts are not required to engage in a colloquy with the defendant 
to ensure he or she understands a waiver provision but should avoid "confusing 
remarks" as part of any colloquy.^"^ 

In Brattain v. State ^^ the court of appeals adhered to Creech and reiterated 
that a colloquy discussing such provisions is not required by the trial court, and 
the appointment of appellate counsel does not invalidate a waiver provision.^^ 
However, in Clay v. State,^^ the court invalidated a waiver provision. There, the 
defendant pleaded guilty to burglary with a cap of thirty -five years pursuant to 
a plea agreement that included a provision agreeing to waive ''any right to 
challenge [the] sentence under Indiana Appellate Rule 7."^^ The court of appeals 
held the provision was not enforceable because the trial court did not confirm the 
defendant's understanding of that plea provision in a colloquy before accepting 
the plea agreement.^^ The court was especially concerned because of the 

71. Mat 799. 

72. Schumm I, supra note 64, at 972 (discussing Perez v. State, 866 N.E.2d 817 (Ind. Ct. 
App. 2007)). 

73. 887 N.E.2d 73 (Ind. 2008). 

74. /^. at74. 

75. Id. 2X15. 

76. Id. 2X15-16. 
11. Id. 2X16. 

78. 891 N.E.2d 1055 (Ind. Ct. App. 2008). 

79. Id. at 1057. Regardless of the waiver provision, the court concluded the sentence of eight 
years with four-and-one-half of those years executed for operating a vehicle when the defendant's 
license was forfeited for life was appropriate in light of the defendant's lengthy history of alcohol- 
and driving-related offenses. Id. 

80. 882 N.E.2d 773 (Ind. Ct. App. 2008). 

81. Id. 2X115. 

82. Id. 2X11 A. 

2009] CRIMINAL LAW 945 

"extensive plea agreement negotiations between the parties."^^ 

Clay is anomalous among waiver cases, and the vast majority of sentencing 
waivers will likely not be challenged on appeal or any such challenges will be 
rejected. As the number of counties using these provisions expands, as it did 
within weeks after Creech was issued, to include large counties that generate 
most criminal appeals — such as Marion County — the number of sentencing 
appeals will diminish further. Only defendants who go to trial or plead "open," 
i.e., without a plea agreement, will be able to avail themselves of sentencing 
appeals under Indiana Appellate Rule 7(B). As made clear by the significant 
number and degree of sentencing reductions discussed below,^"^ however, defense 
counsel should be very cautious in signing a plea agreement that waives the right 
to challenge a sentence. 

B. Limitations on Consecutive Sentences 

An '"episode of criminal conduct' means offenses or a connected series of 
offenses that are closely related in time, place, and circumstance."^^ Significant 
limitations are imposed on consecutive sentences involving non-violent crimes 
committed as part of the same episode of criminal conduct; the aggregate 
sentence cannot exceed the advisory term for the next higher class felony.^^ 

In Henson v. State,^^ the court of appeals found that two burglaries of 
neighboring garages committed in the early morning hours of the same day were 
"'closely related in time, place, and circumstance'" as required by the statute.^^ 
Therefore, the sentence for the two Class C felonies could not exceed ten years 
(the advisory term for a Class B felony). ^^ However, in Williams v. State,^^ the 
court found that attacks occurring on separate ends of the Purdue campus, 
separated by ninety minutes during which the defendant changed his clothes, 
were not part of the same episode of criminal conduct.^ ^ 

Although the statutory provisions on consecutive sentences are usually 
invoked for the benefit of defendants, Hardley v. State^^ is a notable exception. 
In Hardley, the defendant was charged with theft, released on his own 
recognizance, and then committed and was charged with additional offenses. 
The trial court found him guilty of multiple offenses but ordered all counts 
served concurrently. The court of appeals concluded this was improper, in light 
of Indiana Code section 35-50-1 -2(d): "[i]f, after being arrested for one (1) 

83. Mat 776. 

84. 5^^ m/ra Part II.C. 

85. IND. Code § 35-50-l-2(b) (2008). 

86. Id. § 35-50-1 -2(c). 

87. 881 N.E.2d 36 (Ind. Ct. App.), trans, denied, 891 N.E.2d 46 (Ind. 2008). 

88. Id. at 39. 

89. Id. 

90. 889 N.E.2d 1274 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1225 (Ind. 2008). 

91. Id. at 1282. 

92. 893 N.E.2d 1 140 (Ind. Ct. App. 2008). 

946 INDIANA LAW REVIEW [Vol. 42:937 

crime, a person commits another crime . . . upon the person's own 
recognizance [,] the terms of imprisonment for the crimes shall be served 
consecutively, regardless of the order in which the crimes are tried and sentences 
are imposed. "^^ 

Beyond the statutory limitations on consecutive sentences, the supreme court 
placed further restrictions on the imposition of consecutive sentences. In 
Pedraza v. State,^^ the court held consecutive sentences may not be imposed 
when the same conviction is used to elevate one charge and enhance another 
charge based on the defendant's status as a habitual substance offender.^^ The 
court held in Sweatt v. State^^ that the same prior felony may constitute an 
element of the crime of unlawful possession of a firearm by a serious violent 
felon (S VF) and also support a finding that the defendant is a habitual offender.^^ 
However, if the two convictions occur in the same trial, consecutive sentences 
cannot be imposed.^^ 

C. Substantive Review of Sentences for Appropriateness 

Article 7, sections 4 and 6 of the Indiana Constitution, implemented through 
Indiana Appellate Rule 7(B), provide a defendant the right to challenge the 
sentence imposed on the grounds that it is "inappropriate in light of the nature of 
the offense and the character of the offender."^^ The supreme court has made 
clear that this provision provides for extensive sentence review "when certain 
broad conditions are satisfied." ^^^ As the court of appeals aptly recognized a 
quarter of a century ago: 

We are in as good a position as the trial court to make these 
determinations based upon the record before us in a proper case. All the 
material available to the trial court at time of sentencing is equally 
available to us on appeal. It is contained in the record. Further, the 
appellate process is uniquely suited to dispassionate consideration of the 

93. /J. at 1146. 

94. 887 N.E.2d 77 (Ind. 2008). 

95. /^. at81. 

96. 887 N.E.2d 81 (Ind. 2008). 

97. Mat 84. 

98. Id. The court makes no mention in many of these cases of any requirement of an 
objection by defense counsel at sentencing, and many types of sentencing en^or do not require an 
objection to be raised on appeal. The Indiana Supreme Court has explained that both it and the 
court of appeals review "many claims of sentencing error . . . without insisting that the claim first 
be presented to the trial judge." Kincaid v. State, 837 N.E.2d 1008, 1010 (Ind. 2005). That said, 
an objection may lead the trial court to fix the problem, and knowing the law on this point will, at 
a minimum, allow counsel to better advise their client of the exposure in any case. 

99. Ind. R. Apr P. 7(B). 

100. Neale v. State, 826 N.E.2d 635, 639 (Ind. 2005); see also Stewart v. State, 866 N.E.2d 
858, 865-66 (Ind. Ct. App. 2007) (observing that, as of May 2007, the Indiana Supreme Court has 
reduced eleven of twenty-two sentences reviewed under Appellate Rule 7(B) since January 2003). 

2009] CRIMINAL LAW 947 

subject free of the everyday pressures of a trial courtroom 


More recently, our supreme court has emphasized that the Indiana Constitution 
authorizes 'Hndependent appellate review'' of a sentence, even when that 
sentence is imposed pursuant to a plea agreement that provides a cap and ''the 
trial court has been meticulous in following the proper procedure in imposing a 

Article 7, sections 4 and 6 of the Indiana Constitution were proposed in the 
1960s and took effect as constitutional amendments approved by the voters in 
jQ'7Q 103 jj^g framers of ''these provisions had in mind the sort of sentencing 
revision conducted by the Court of Criminal Appeals in England."'^ In England, 
the appellate court 

shall, if they think that a different sentence should have been passed, 
quash the sentence passed at the trial, and pass such other sentence 
warranted in law by the verdict (whether more or less severe) in 
substitution therefor as they think ought to have been passed, and in any 
other case shall dismiss the appeal. ^^^ 

"The Commission's comments demonstrate that the intent of the Amendment 
was to expand the role of appellate review, not restrict it."^°^ At the time of the 
Amendment, the English system included "a complex and coherent body of 
sentencing principles and policy," which had been developed to realize the goal 
of eradicating disparities in the sentences imposed by trial courts. '^^ 

Sentencing principles geared toward eradicating disparities between 
sentences have been applied in many cases. For example, in reviewing sentences 
of defendants who plead guilty in England, "the Court of Appeal has formulated 
the principle that ... an offender's remorse, expressed in his plea of guilty, may 
properly be recognized as a mitigating factor." '^^ The Indiana Supreme Court has 
taken a similar view, recognizing that an early guilty plea saves the victims from 
going through a full-blown trial and conserves limited prosecutorial and judicial 

101. Cunningham v. State, 469 N.E.2d 1, 8 (Ind. Ct. App. 1984). 

102. Childress v. State, 848 N.E.2d 1073, 1079-80 (Ind. 2006). 

103. See Walker v. State, 747 N.E.2d 536, 537 (Ind. 2001); see generally Article 7, Indiana 
Constitution, (detailing ratification date) (last 
visited Feb. 4, 2009). 

104. Id.; see also Report of the Judicial Study Commission cmt. at 140 (1966) ("[T]he 
proposal that the appellate power in criminal cases include the power to review sentences is based 
on the efficacious use to which the power has been put by the Court of Criminal Appeals in 

105. Walker, lAl N.E.2d at 538 (quoting Criminal Appeal Act, 1907, 7 Edward 7, ch. 23 § 

106. King V. State, 769 N.E.2d 239, 241 (Ind. Ct. App. 2002) (Najam, J., concurring). 

1 07 . D. A. Thomas, Appellate Review of Sentences and the Development of Sentencing Policy: 
The English Experience, 20 Ala. L. Rev. 193, 194, 197 (1968). 

108. /J. at 201. 

948 INDIANA LAW REVIEW [Vol. 42:937 

resources; therefore, it is a mitigating circumstance entitled to significant 
weight. '^^ 

Moreover, the supreme court, consistent with English practice, has taken an 
especially hard look at consecutive sentences, especially those involving the 
same victim. ^*° In England, trial courts also enjoy considerable discretion in 
imposing concurrent or consecutive sentences, but 

the aggregate of the sentences imposed must bear some relationship to 
the gravity of the individual offences. Even for completely separate 
offences, it is not permissible to aggregate consecutive sentences so that 
a total is reached which is far in excess of what would be considered 
appropriate for the most serious of the individual offences.^^^ 

In Serino v. State, the Indiana Supreme Court built on existing precedent in 
holding that a 385-year sentence imposed after a jury found the defendant guilty 
of twenty-six counts inappropriate "where there was one victim, multiple counts 
. . . , and a lack of criminal history."^ ^^ Although the sentencing statutes allowed 
for consecutive sentences, the court concluded "there is no escaping that the 
outcome is at the high end of the sentencing spectrum" and revised the sentence 
to three presumptive, consecutive terms. ^^^ 

With this backdrop in mind, the Survey turns to several cases from the survey 
period, most of which reduced sentences while relying on principles that can be 
applied to future cases. ^^"^ Principles are not always easy to divine, but the 
reductions in this year's cases continue a few noticeable trends. 

1. Indiana Supreme Court. — In Reid v. State, ^^^ the court reviewed a 
maximum sentence of fifty years for conspiracy to commit murder. ^^^ While 
incarcerated in a county jail, Reid began discussing with a fellow inmate his 
desire to have his wife and mother-in-law killed. ^^^ That inmate had snitched on 
others in the past and did the same with Reid, securing the involvement of an 

109. See Francis v. State, 817 N.E.2d 235, 238 (Ind. 2004); Hope v. State, 834 N.E.2d 713, 
719(Ind. Ct App. 2005). 

1 10. See, e.g., Serino v. State, 798 N.E.2d 852, 857-58 (Ind. 2003). 

111. Thomas, supra note 107, at 203. 

1 12. Serino, 798 N.E.2d at 857. 

113. Mat 858. 

1 14. Beyond these cases, King v. State, 894 N.E.2d 265 (Ind. Ct. App. 2008), offers an 
important reminder for appellate lawyers. Sentencing challenges may allege trial court en^or in its 
sentencing statement, which is reviewed for an abuse of discretion, or may challenge the number 
of years or placement as inappropriate. Id. at 267. As to the latter, appellants must convince the 
appellate court a sentence is inappropriate in light of the nature of the offense or the character of 
the offender under Indiana Appellate Rule 7(B). This is an independent review by the appellate 
court and not reviewed under an abuse of discretion standard. Id. at 267-68. 

115. 876 N.E.2d 1 1 14 (Ind. 2007). 

116. Mat 1115. 

117. Id. 

2009] CRIMINAL LAW 949 

undercover officer. ^^^ Although the court of appeals affirmed the sentence, the 
Indiana Supreme Court granted transfer and reduced it to the advisory term of 
thirty years. ^^^ The court seemed most impressed by Reid's young age (twenty- 
two) and "that no one was injured, both potential victims pleaded for leniency, 
and Reid had a history of mental health problems."^^^ 

In Smith v. State, ^^^ the Indiana Supreme Court reduced a 120-year sentence 
(four consecutive terms of thirty years) to sixty years (two counts consecutive, 
two concurrent). ^^^ The crimes involved the same victim^ — the defendant's 
stepdaughter with whom he had abused a position of trust — and he had 
previously been convicted of Class D felony child molesting and charged with 
sexual battery about ten years earlier. ^^^ These aggravating facts were offset by 
the defendant's poor mental health, which included depression and suicide 
attempts. ^^'^ 

In Monroe v. State, ^^^ the supreme court reduced a 100-year sentence for five 
counts of Class A felony child molesting (twenty on each count, served 
consecutively) to fifty years (the maximum sentence on each count, served 
concurrently). ^^^ The court found the nature of the crimes (repeated molestation 
over two years) and the defendant's position of trust warranted enhanced 
sentences, but not consecutive sentences, in light of the defendant's minor 
criminal history. ^^^ 

The lesson of Smith, Monroe, and other recent child molest cases involving 
a single victim is that crimes against a single victim should generally not put a 
defendant in the century club. Indeed, Smith includes a string cite of cases where 
the court has reduced lengthy consecutive sentences to one or two consecutive 

2. Indiana Court of Appeals. — In Williams v. State,^^^ the court reiterated 
that "the State may not 'pile on' sentences by postponing prosecution in order to 
gather more evidence."^^^ Relying on Indiana Appellate Rule 7(B), the court 
extended those cases requiring concurrent sentences when the State sponsors 
multiple drug buys to convictions obtained from evidence seized from the 

118. Mat 1117. 

119. Mat 1116-17. 

1 20. Id. The court mentioned that Reid had "amassed a lengthy criminal history" but observed 
that "many of these offenses were either misdemeanors, occurred while he was a juvenile, or did 
not result in any physical injuries." Id. at 1116. 

121. 889 N.E.2d 261 (Ind. 2008). 

122. Id. at 262. 

123. Mat 263-64. 

124. Mat 264. 

125. 886 N.E.2d 578 (Ind. 2008). 

126. M. at 581. 

127. M. at 580. 

128. 5miY/i, 889 N.E.2d at 264-65. 

129. 891 N.E.2d 621 (Ind. Ct. App. 2008). 

130. M. at 635. 

950 INDIANA LAW REVIEW [Vol. 42:937 

defendant's home within twenty-four hours of the last buy pursuant to a search 
warrant. ^^* 

In Feeney v. State, ^^^ the Court of Appeals reduced a forty-year sentence 
(thirty years at the Department of Correction, four years at community 
corrections, and six years on supervised probation) for ten counts of burglary to 
fourteen years (ten years at the Department of Correction, two years on 
community corrections, and two years on supervised probation). ^^^ Regarding 
the nature of the offense, the court expressed concern at the sheer number of 
burglaries but noted that none involved violence or a threat of violence. ^^'^ More 
importantly, regarding the character of the offender, the court gave significant 
weight to the young age of the defendant (eighteen) and his lack of a prior 
delinquent or criminal history. ^^^ 

In Kemp v. State, "^^^ the court reduced a thirty-two-year sentence for a church 
administrator who stole more than $350,000 from a church over a four-year 
period. ^^^ In reducing the sentence, the court was impressed by the absence of 
any prior criminal history and the defendant's willingness to plead guilty as 
charged. ^^^ The court directed the trial court "to decide how Kemp should serve 
those sixteen years, keeping the goal of monetary restitution to the Church in 

In Filice v. State }^^ the court of appeals reduced a ten-year sentence for Class 
B felony rape to eight years. ^"^^ The court seemed particularly impressed with the 
lack of any criminal history for the thirty-four-year-old defendant who had been 
a successful college professor. ^"^^ 

In Westlake v. State, ^^^ the court of appeals cut in half a fourteen-year 
sentence for Class B felony dealing and Class C felony neglect of a dependent. ^"^ 
Although the defendant had been dealing drugs for several months from a home 
where she lived with her six-year-old son, the court found her offenses 

were not a continuation of a related criminal history and her character is 
unusually and extraordinarily mitigating. The combination of 
Westlake' s previously undiagnosed bipolar disorder, her comprehensive 

131. /J. at 633-35. 

132. 874 N.E.2d 382 (Ind. Ct. App. 2007). 

133. /J. at 383. 

134. /J. at 385. 

135. Mat 385-86. 

136. 887 N.E.2d 102 (Ind. Ct. App. 2008). 

137. Id. at 105. 

138. Id. at 106. 

139. Id. 

140. 886 N.E.2d 24 (Ind. Ct. App. 2008). 

141. Mat 39-40. 

142. M. at40. 

143. 893 N.E.2d 769 (Ind. Ct. App. 2008). 

144. M. at 772-73. 

2009] CRIMINAL LAW 95 1 

response to treatment, and resulting stellar success in Tippecanoe 
County ' s excellent pre-conviction program lead us to the conclusion that 
her sentence is inappropriate. ^"^^ 

Two years of the seven-year revised sentence were suspended, and the five-year 
executed term was ordered served on community corrections.'"^^ 

Not every defendant who sought a reduced sentence received one. In Fonner 
V. State, '"^^ a defendant who received the four-year advisory sentence for the Class 
C felony of operating a vehicle while privileges are forfeited for life did not 
challenge the length of the sentence but merely challenged the appropriateness 
of placement in the Department of Correction. '"^^ Although the location where 
a sentence is to be served may be challenged under Indiana Appellate Rule 7(B), 
the court observed "it will be quite difficult for a defendant to prevail on a claim 
that the placement of his or her sentence is inappropriate."'"^^ The court correctly 
observed that "trial courts know the feasibility of alternative placements in 
particular counties or communities."'^^ 

As Fonner suggests, defendants face an uphill battle in arguing that a 
Department of Correction sentence should be revised to a community corrections 
placement. A defendant who receives a split sentence between the Department 
of Correction and community corrections and seeks to reduce the Department of 
Correction portion of the sentence is less likely to face the same burden because 
there is no question the defendant qualifies for the alternative placement, as 
implicit in Feeney}^^ 

3. Conclusion. — The court takes an especially hard look at consecutive 
sentences, especially when imposed in a case involving the same victim, such as 
a child molestation case. Here, the prosecutor has considerable discretion in 
charging and negotiating a plea, and the supreme court has gone a long way in 
leveling the field by often limiting sentences to a maximum term for a single 
count or advisory term for two consecutive counts. '^^ As regards the character 
of the offender, Indiana courts have continued to be impressed by defendants 
with little or no criminal history, those who plead guilty for their offenses, and 

145. /J. at 772. 

146. /J. at 772-73. 

147. 876 N.E.2d 340 (Ind. Ct. App. 2007). 

148. Id. at 343. 

149. Id. 

150. Id. 

151. See Feeney v. State, 874 N.E.2d 382 (Ind. Ct. App. 2007); see also Davis v. State, 851 
N.E.2d 1264, 1269 (Ind. Ct. App. 2006) (reducing sentence of four years at DOC followed by two 
years at community corrections to "four years with the time remaining on her sentence to be served 
through Community Corrections so that she may continue to work to provide for her children and 
to pay restitution to the victims"). 

152. Serino v. State, 798 N.E.2d 852, 857 (Ind. 2003) (referencing "muscular" charging 
decisions that may "create the theoretical possibility of very long sentences"). 

952 INDIANA LAW REVIEW [Vol. 42:937 

those suffering from a mental illness. ^^^ If a defendant falls into two or three of 
these categories, a maximum or near-maximum sentence is almost certain to be 

D. Clarifying Credit Time Confusion: A Marion County Exception 

In Robinson v. State, "^^^ the Indiana Supreme Court adopted a presumption 
that "[s]entencing judgments that report only days spent in pre-sentence 
confinement and fail to expressly designate credit time earned shall be 
understood by courts and by the Department of Correction (DOC) automatically 
to award the number of credit time days equal to the number of pre-sentence 
confinement days."^^^ The court emphasized that a motion to correct an 
erroneous sentence may only arise out of information contained on the formal 
judgment of conviction — and not from an abstract of judgment. ^^^ 

In Neff V. State, ^^^ the court carved out an exception for defendants 
challenging erroneous sentences in Marion County, where trial courts generally 
issue a DOC abstract and not a written judgment of conviction. ^^^ "[W]hen a 
defendant files a motion to correct an erroneous sentence in a county that does 
not issue judgments of conviction (we are currently aware only of Marion 
County), the trial court's abstract of judgment will serve as an appropriate 
substitute for purposes of making the claim." ^^^ Although Neff is certainly a 
necessary and welcome development for litigants in Marion County in the event 
they seek to challenge their sentence, it seems to give judges in Marion County 
a free pass to disregard statutes ^^^ or statewide court rules ^^^ simply because they 
have a "very high volume of criminal cases."*^^ One can hope the trend is not 
extended further — and never in areas where litigants would be disadvantaged as 
the result of special rules. 

Finally, the court also included a helpful explanation of the proper method 
to calculate the earliest release date from DOC: "When an offender is sentenced 
and receives credit for time served, earned credit time, or both, that time is 
applied to the new sentence immediately, before application of prospective 
earned credit time, in order to determine the defendant's earliest release date."^^'^ 


153. See supra notes 1 15-46 and accompanying text. 

1 54. See supra notes 1 1 5-46 and accompanying text; accord Schumm I, supra note 64, at 968- 

155. 805 N.E.2d 783 (Ind. 2004). 

156. Id. at 792. 

157. /^. at 794. 

158. 888 N.E.2d 1249 (Ind. 2008). 

159. /d at 1251. 

160. Id. 

161. See, e.g., iND. CODE §§ 35-38-2-3(a), -4(b) (2008). 

162. See, e.g., iND. R. Crim. P. 15.1. 

163. A^e#, 888N.E.2datl251. 

164. Id. 

2009] CRIMINAL LAW 953 

m. Developments Outside the Sentencing Realm 

Beyond sentencing, published opinions also tackled issues including bail, 
jury selection, availability of interpreters, Internet crimes against children or 
police officers posing as children, and probation. This brief survey seeks to 
explore those issues that have had or are likely to have a significant impact on 
criminal cases — from beginning to end. 

A. A Rare Bail Challenge 

Both the Eighth Amendment to the U.S. Constitution and article 1, section 
17 of the Indiana Constitution impose significant limitations on the setting of 
bail.^^^ ''Bail set at a figure higher than an amount reasonably calculated" to 
assure the presence of the accused "is 'excessive' under the Eighth 
Amendment." ^^^ Fixing the amount of bail in each case "must be based upon 
standards relevant to the purpose of assuring the presence of that defendant. "^^^ 
The Indiana Constitution expressly provides a right to bail "by sufficient 
sureties."'^^ This right is more expansive than that provided by the United States 
Constitution. ^^^ "The law confines the use of pre-trial detention to only one 
end — namely, that the criminal defendant be present for trial. This limitation is 
implicit in the concept of bail."^^^ Pretrial incarceration cannot be punitive, and 
accused persons are presumed innocent. ^^^ 

Indiana Code section 35-33-8-4(b) lists several factors to be considered in 
setting bail.^^^ A bail matrix or bail schedule, which are widely used in counties 
across the state, will seldom track these. In Samm v. State, ^^^ the court of appeals 
reiterated "[pjaramount considerations convince us that bail should be tailored 
to the individual in each circumstance. Bond schedules should serve only as a 
starting point for such considerations. "^^^ Although the defendant submitted 
evidence on several of the statutory factors, the trial court relied primarily on the 
number of charges pending. '^^ By "failing to acknowledge uncontroverted 
evidence on several" statutory factors, the trial court was held to have abused its 

165. See U.S. CONST, amend. VIII; IND. CONST, art. 1, § 17. 

166. Stack V. Boyle, 342 U.S. 1, 5 (1951). 

167. Id.; accord Hobbs v. Lindsey, 162 N.E.2d 85, 88 (Ind. 1959) ("[T]he principal purpose 
of bail is the assurance of the accused party's presence in court .... '[B]ail set at a figure higher 
than an amount reasonably calculated to fulfill this purpose is 'excessive' ....'") (quoting Boyle, 
342 U.S. at 3). 

168. Ind. Const, art. 1 § 17. 

169. Ray v. State, 679 N.E.2d 1364, 1366 (Ind. Ct. App. 1997); cf. U.S. Const, amend. VIII. 

170. Brown v. State, 322 N.E.2d 708, 712 (Ind. 1975) (citing iND. CONST, art. 1, § 17). 

171. Sherelis v. State, 452 N.E.2d 411,413 (Ind. Ct. App. 1983). 

172. See iND. CODE § 35-33-8-4(b) (2008). 

173. 893 N.E.2d 761 (Ind. Ct. App. 2008). 

174. Id. 3.1166. 

175. Id. at 768. 

954 INDIANA LAW REVIEW [Vol. 42:937 

discretion /^^ 

Counsel should be sure to make a record in a bail hearing that is grounded 
in the factors listed in Indiana Code section 35-33-8-4(b). Bail determinations 
are final, appealable judgments. ^^^ Rarely, however, do bail challenges make it 
to the court of appeals or supreme court. The standard timeline for record 
preparation and briefing generally takes more than six months, *^^ and most cases 
go to trial in less time, making any challenge to bail moot. Moreover, seeking an 
expedited appeal is important to avoid a finding of mootness, although the court 
of appeals held in Samm that an exception to the mootness doctrine applied. ^^^ 

Bail schedules are especially problematic for indigent defendants. The 
ultimate and salient determination is a binary one: Will the defendant be free on 
bail pending trial or remain incarcerated? Many indigent defendants can post no 
or very little bail money; therefore, it is especially important to give weight to the 
statutory factors of "ability to give bail" and "the source of funds or property to 
be used to post bail" to avoid jails filled with poor people charged with minor 
crimes. ^^^ Incarcerating such defendants, absent a showing they are not likely to 
appear in court, runs afoul not only of the presumption of innocence but also the 
constitutional guarantee of equal protection. ^^^ "In criminal trials a State can no 
more discriminate on account of poverty than on account of religion, race, or 
color. Plainly the ability to pay costs in advance bears no rational relationship 
to a defendant's guilt or innocence . . . ."^^^ 

Finally, questions will likely surface in future cases as to the specific 
contours of the right to bail. The constitutional right to bail and statutory 
considerations do not specify a time limit for their enforcement, and it is often 
several hours or possibly one or more days before a judicial officer can review 

176. Id. Although bail schedules are used in many counties, the Vanderburgh County local 
rule, for example, appropriately provides that "[t]he Court shall consider factors found in IC 35-33- 
8-4 in setting appropriate bond in all cases." Vanderburgh Circuit and Superior Court R. 
1 1 1208.pdf (last visited Feb. 4, 2009). 

177. Bradley v. State, 649 N.E.2d 100, 106 (Ind. 1995) ("The denial of bail is deemed a final 
judgment appealable immediately, without waiting for the final judgment following trial."). 

178. The Indiana Rules of Appellate Procedure provide the court reporter ninety days after the 
filing of the Notice of Appeal to prepare the transcript, which generally must be completed before 
the Appellant can begin working on his brief, which is due thirty days later. Ind. R. App. P. 1 1(B), 
45(B). The Appellee then has thirty days to file its brief, before the Appellant has another fifteen 
days to file a reply brief under Rule 45(B). Ind. R. App. P. 45(B). The court of appeals then needs 
at least a few weeks, if not months, to issue a written opinion. 

179. Samm, 893 N.E.2d at 765. Moreover, the court of appeals has previously decided, long 
after conviction, challenges involving bail issues without any mention of mootness. See, e.g., 
Traylor v. State, 817 N.E.2d 61 1, 625 (Ind. Ct. App. 2004); Wertz v. State, 771 N.E.2d 677, 680-82 
(Ind. Ct. App. 2002). 

180. Ind. Code § 35-33-8-4(b) (2008). 

181. U.S. Const, amend. XIV. 

182. Griffin v. Illinois, 351 U.S. 12, 17-18 (1956). 

2009] CRIMINAL LAW 955 

bail. New statutes put restrictions on setting bail for persons charged with 
domestic violence^^^ and certain sex offenders. ^^"^ 

B. Jury Selection: The Batson Door Swings Both Ways 

Many lawyers think of Batson v. Kentucky^^^ as prohibiting prosecutors from 
striking all African-American jurors, but Indiana cases make clear the Batson 
Rule is much broader. "[T]he Constitution prohibits a criminal defendant from 
engaging in purposeful discrimination on the ground of race in the exercise of 
peremptory challenges."'^^ The following analysis then applies: 

First, the party contesting the peremptory challenge must make a prima 
facie showing of discrimination on the basis of race. Second, after the 
contesting party makes a prima facie showing of discrimination, the 
burden shifts to the party exercising its peremptory challenge to present 
a race-neutral explanation for using the challenge. Third, if a race- 
neutral explanation is proffered, the trial court must then decide whether 
the challenger has carried its burden of proving purposeful 

In Jeter v. State defense counsel offered three race-neutral reasons for 
striking a white juror: 'XI) the juror's father was a police officer; (2) his 
grandfather had been a local attorney and judge of a municipal court; and (3) the 
juror responded T guess not' when asked if he could think of any murders that 
were not suitable for the death penalty."'^^ However, the trial court did not 
believe the stated explanation for challenging the juror and refused to allow the 
use of a peremptory challenge. '^^ At the time defense counsel "moved to strike 
the juror, he had previously used his first nine peremptory challenges to exclude 
whites from the jury, especially white males. As a consequence, of the ten seated 

1 83. A new statute requiring a "cooling off' period of eight hours before a court may release 
a person arrested for a crime of domestic violence seems immune from attack. See IND. Code §§ 
35-33-1-1.7 (discussing the duty of facilities), 35-33-8-6.5 (2008) (discussing court's duties). 

1 84. During the 2008 session the General Assembly added Indiana Code section 35-33-8-3.5 
to place restrictions on bail for persons charged with a sex or violent offense who are sexually 
violent predators under Indiana Code section 35-38- 1-7.5. No bail is permitted under a bail hearing 
held within forty-eight hours of arrest. Although there seems to be little basis on which to challenge 
such a restriction for a recidivist sexual offender, language in the statute suggests it could also be 
applied simply to someone arrested for child molesting or child solicitation, regardless of prior 
status. This would appear to conflict with the constitutional right to bail and general bail statute, 
although the question remains whether being held without bail for forty-eight hours is an 
unconstitutional denial of bail (as opposed to a permissible delay in setting bail). 

185. 476 U.S. 79(1986). 

186. Georgia v.McCollum, 505 U.S. 42, 59 (1992). 

187. Jeter v. State, 888 N.E.2d 1257, 1263 (Ind. 2008) (citing Batson, 476 U.S. at 96-97). 

188. Id. at 1264. 

189. Id. 

956 INDIANA LAW REVIEW [Vol. 42:937 

jurors, none were white males." ^^^ Based on this, the supreme court concluded 
the trial court's ruling was not clearly erroneous. '^^ 

This case underscores that trial judges have considerable discretion in 
deciding whether to accept or reject the reasons for a challenge. Trial courts can 
reject the reasons given by the State when defendants raise a Batson challenge, 
although such rulings are unlikely to be appealed. ^^^ 

C ''Reasonable " Parental and Teacher Discipline 

In Willis V. State, ^^^ the Indiana Supreme Court set aside a mother's 
conviction for battery of her child based on the theory of reasonable parental 
discipline. ^^"^ "To sustain a conviction for battery where a claim of parental 
privilege has been asserted, the State must prove that either: (1) the force the 
parent used was unreasonable or (2) the parent's belief that such force was 
necessary to control her child and prevent misconduct was unreasonable." ^^^ The 
court adopted the Restatement (Second) of Torts view: "A parent is privileged 
to apply such reasonable force or to impose such reasonable confinement upon 
his [or her] child as he [or she] reasonably believes to be necessary for its proper 
control, training, or education." ^^^ The following non-exhaustive factors should 
be weighed: 

(a) whether the actor is a parent; 

(b) the age, sex, and physical and mental condition of the child; 

(c) the nature of his offense and his apparent motive; 

(d) the influence of his example upon other children of the same family 
or group; 

(e) whether the force or confinement is reasonably necessary and 
appropriate to compel obedience to a proper command; 

(f) whether it is disproportionate to the offense, unnecessarily degrading, 
or likely to cause serious or permanent harm.^^^ 

In Willis, the child was eleven, and the court reasoned more severe discipline 
is appropriate for older children than younger ones.^^^ The child had taken his 
mother's clothes to school, sold them, and then lied about it, which the court 
found to be serious, especially because it was part of a pattern of similar 

190. Id. at 1265. 

191. Id. 

192. See generally IND. CODE § 35-38-2(4) (2008) (providing the State the right to appeal a 
reserved question of law, which is seldom exercised). 

193. 888 N.E.2d 177 (Ind. 2008). 

194. Id. at 184. 

195. Id. at m. 

196. Id. (quoting and adopting RESTATEMENT (SECOND) OFTorts § 147(1) (1965)). 

197. Id 

198. /d at 183. 

2009] CRIMINAL LAW 957 

behavior. ^^^ The mother had unsuccessfully tried progressive forms of discipline, 
such as grounding the child or withholding privileges, and considered the 
appropriate punishment for two days before the spanking.^^^ The court concluded 
the five to seven swats on the buttocks, arm, and thigh with a belt or extension 
cord was not unreasonable, as it left only mild, temporary bruising the next day 
and did not require medical attention. ^^^ 

The Indiana Court of Appeals had its first opportunity to apply Willis in 
Matthew v. State?^^ There, a mother struck a rebellious twelve year old with a 
closed fist and belt downstairs and then followed the child upstairs after he 
escaped.^^^ Although the child had been verbally warned about his behavior and 
no permanent injuries resulted, the court upheld the conviction.^^"^ Chief Judge 
Baker dissented, finding the facts remarkably similar to Willis: the child was 
twelve years old, just one year older than the child in Willis, and progressive 
discipline had been employed. Chief Judge Baker thus believed ten blows with 
a hand and belt were not excessive.^^^ 

These cases are exceedingly fact sensitive, and the great amount of deference 
given factfinders seems somewhat diminished in Willis }^^ In light of that case, 
defendant may seek to have the case dismissed as a matter of law through a 
pretrial motion to dismiss to avoid a trial. ^^^ If the cases go to trial, the 
Restatement factors would seem helpful to a jury through an instruction, although 
the trend of the Indiana Supreme Court has been moving away from including 
language from appellate opinions injury instructions.^^^ Legislative action may 
occur as well. As an Associated Press editorial put it, "In a state that has a 
serious problem with violence against children, let us hope that a 4-1 decision by 
the Indiana Supreme Court did nothing to dissuade concerned observers from 
getting involved."^^^ 

The court of appeals also sanctioned physical contact as part of reasonable 
teacher discipline. In State v. Fettig,^^^ the court upheld the dismissal of a battery 

199. Id. 

200. Id. 

201. Id. at 183-84. 

202. 892 N.E.2d 695 (Ind. Ct. App. 2008). 

203. Id. at 696-97. 

204. Id. at 699. 

205. Id. at 701 (Baker, C.J., dissenting). 

206. Id. at 701-02 (Baker, C.J., dissenting) ("Here — and in Willis — the factfinder concluded 
that the respective mothers' actions went beyond the boundary of reasonableness, and I am 
uncomfortable with an appellate court second-guessing that conclusion as a matter of law. That 
said, it is evident that our Supreme Court has instructed us to do precisely that . . . ."). 

207. Cf. State v. Fettig, 884 N.E.2d 341 (Ind. Ct. App. 2008). 

208. See generally Joel M. Schumm, Recent Developments in Indiana Criminal Law and 
Procedure, 2>1 iND. L. Rev. 1003, 1010-1 1 (2004) [hereinafter Schumm III]. 

209. Children at Risk, EVANSVILLE COURIER & PRESS, June 30, 2008, available at 

210. 884 N.E.2d 341 (Ind. Ct. App. 2008). 

958 INDIANA LAW REVIEW [Vol. 42:937 

charge against a teacher who disciphned a student by grabbing her chin, which 
involved "no weapons, no closed fist, no repeated blows, no verbal abuse, and the 
only alleged injury being a stinging sensation."^^^ It relied on cases fi*om the 
1 800s, which provoked a dissent that noted the "world has changed greatly since 
that time" and the whipping allowed in those cases would probably not be 
allowed today.^^^ 

D. Confrontation Clause 

In State v. Martin,^^^ the court of appeals held the trial court erred in finding 
pretrial statements made by a domestic violence victim testimonial and therefore 
inadmissible. ^^"^ The statements were made minutes after police responded to a 
911 call of a woman with blood coming from her mouth running from a 
vehicle.^ ^^ The woman told police her boyfriend had struck her in the face in the 
car and then had driven off with her children.^ ^^ She did not testify at trial, and 
the State sought to admit her statements to police.^^^ Under Davis v. 
Washington, ^^^ the key inquiry is whether the statements were testimonial: 

Statements are nontestimonial when made in the course of police 
interrogation under circumstances objectively indicating that the primary 
purpose of the interrogation is to enable police assistance to meet an 
ongoing emergency. They are testimonial when the circumstances 
objectively indicate that there is no such ongoing emergency, and that 
the primary purpose of the interrogation is to establish or prove past 
events potentially relevant to later criminal prosecution. ^^^ 

The court in Martin found the statements made by the victim were not 
testimonial because (1) the declarant was describing events as they were actually 
happening, instead of past events; (2) the declarant was facing an ongoing 
emergency; (3) the nature of the police inquiry elicited statements necessary to 
be able to resolve the present emergency rather than simply to learn about past 
events; and (4) the lack of formality of the interview. ^^° 

The farther reaching issue brewing around the Confrontation Clause is 
whether a forensic analyst's lab report prepared for use in criminal prosecution 
is testimonial and therefore subject to cross-examination under the Sixth 

211. /J. at 346. 

212. Id. at 347 (Kirsch, J., dissenting). 

213. 885 N.E.2d 18 (Ind. Ct. App. 2008). 

214. Mat 21. 

215. /J. at 19. 

216. Id. 

217. Id. 

218. 547 U.S. 813(2006). 

219. /J. at 822. 

220. Marfm, 885 N.E.2d at 20-21. 

2009] CRIMINAL LAW 959 

Amendment.^^^ The Indiana Court of Appeals has issued seemingly 
contradictory opinions,^^^ and the matter is pending before the Indiana Supreme 

E. No New Oath Required for Officers 

The biggest non-issue of the survey period is one that generated significant 
media attention. The Indianapolis Metropolitan Police Department (IMPD) was 
created by statute and local ordinance to assume law enforcement responsibilities 
for Marion County beginning January 1, 2007.^^^ It replaced the Indianapolis 
Pohce Department (IPD) and Marion County Sheriff Department (MCSD).^^^ A 
defendant arrested by IMPD officers challenged her arrest in 2007 on the grounds 
that the arresting officer, although sworn as an IPD or MCSD officer, had not 
been re-sworn as an IMPD officer. ^^^ The challenge was grounded in large part 
in the statutory requirement that all law enforcement officers take an oath before 
assuming their official duties.^^^ Most judges quickly rejected such challenges, 
but one judge granted the defendant's motion to suppress all evidence from her 
traffic stop and sua sponte dismissed the case, concluding the arresting officer 
was not authorized by statute or the constitution to enforce the laws of Indiana.^^^ 
The Indiana Supreme Court reversed, noting that the statute did not "impose any 
additional requirements on officers, such as passing a new examination or re- 
swearing," and the ordinance "declared that all members of the IPD and MCSD 

221. Petition for Writ of Certiorari at 9, Melendez-Diaz v. Massachusetts, No. 07-591, 2007 
WL 3252033 (U.S. Oct. 26, 2007) (petition granted, 128 S. Ct. 1647 (2008)). 

222. In Pendergrass v. State, 889 N.E.2d 861 (Ind. Ct. App.), vacated by 898 N.E.2d 1219 
(Ind. 2008), the court of appeals addressed the admissibihty of "test results" from DNA analysis 
offered through the supervisor of the technician who performed the analysis and prepared the 
report. The court rejected a Crawford v. Washington, 541 U.S. 36 (2004), challenge because "the 
Confrontation Clause does not apply to statements admitted for reasons other than proving the truth 
of the matter asserted" and the court found the exhibits were not offered to prove molestation but 
rather "merely provided context" for the expert's opinion. Id. at 869. Weeks later, in Jackson v. 
State, 891 N.E.2d 657 (Ind. Ct. App. 2008), another panel of the court of appeals found a Sixth 
Amendment Confrontation Clause violation when the trial court admitted a lab report prepared by 
a technician who did not testify at trial. The court sided with those courts which have found such 
reports testimonial on the grounds that they are ( 1) created by a law enforcement agency (2) for the 
prosecution (3) for the sole purpose of proving an element of a charged crime. Id. at 661. The 
ability to cross-examine the technician's supervisor is not a sufficient substitute for the right to 
confront and cross-examine the technician — nor does the business record exception salvage the 
testimony. Id. at 662. 

223. State v. Oddi-Smith, 878 N.E.2d 1245, 1247 (Ind. 2008). 

224. Id. 

225. Id 

226. Id. at 1247-48 (citing iND. CODE § 5-4-l-l(a) (2006)). 

227. Id. at 1247. 

960 INDIANA LAW REVIEW [Vol. 42:937 

automatically became members of the IMPD."^^^ The court concluded "the 
arresting officer was recruited, trained, and sworn as an IPD officer and that he 
took all that with him to the IMPD."^^^ The suppression and dismissal were 
reversed, and the case was remanded for a trial on the merits.^^^ 

F. Non-Indigent Defendants: BYOT (Bring Your Own Translator) 

JnArrieta v. State, ^^^ the Indiana Supreme Court provided a thorough review 
of the history and procedures for use of interpreters in Indiana courts.^^^ It 
reiterated that indigent defendants are entitled to interpreters at public expense 
both for the proceedings and for the defendant.^^^ When a defendant is not 
indigent, however, the court crafted a different rule. The court first held that 
"proceedings interpreters," or those who translate non-English testimony from 
the witness stand, must be provided at public expense.^^"^ "Just as a trial cannot 
proceed without a judge or bailiff, an English-speaking court cannot consider 
non-English testimony without an interpreter. "^^^ However, the court 
differentiated solvent defendants by stating they are not entitled to "defense 
interpreters" — those who interpret the trial for the defendant and help him 
communicate with his lawyer — at public expense, just as a solvent defendant is 
not entitled to court-appointed counsel. ^^^ 

Although Arrieta sets a clear rule for these two types of interpreters, it does 
not provide much guidance to trial courts in deciding whether a defendant is 
financially able to hire an interpreter. Rather, it simply concludes that Arrieta, 
who posted a $50,000 bond and hired his own lawyer, was required to "present 
evidence contradicting his ability to pay for a defense interpreter."^^^ In future 
cases, the trial court must make an indigency determination, just as it does for 
counsel, "based on a thorough examination of the defendant's total financial 
picture as is practical, and not on a superficial examination of income and 
ownership of property."^^^ 

In Gado v. State,^^^ the court of appeals confronted a different set of 
circumstances but nevertheless upheld the denial of an interpreter.^"^^ Although 

228. Mat 1248-49. 

229. Mat 1249. 

230. Id. 

231. 878 N.E.2d 1238 (Ind. 2008). 

232. Mat 1240-44. 

233. M. at 1232-44. 

234. M. at 1245. 

235. Id. 

236. Id. 

237. Id. 

238. Id. at 1245 n.lO (internal quotation marks omitted) (quoting Lamonte v. State, 839 
N.E.2d 172, 176-77 (Ind. Ct. App. 2005)). 

239. 882 N.E.2d 827 (Ind. Ct. App.), trans, denied, 891 N.E.2d 49 (Ind. 2008). 

240. M. at 831. 

2009] CRIMINAL LAW 961 

the defendant sought an interpreter of Djerma, a rare language for which it is 
difficult to find interpreters, the court had interacted with the defendant in 
English several times and relied on evidence that the defendant had previously 
conversed with a witness many times in English.^"^^ 

G. Online Child Solicitation and Attempted Sexual Misconduct 

Millions of television viewers have become accustomed to seeing online 
chats with would-be children end with the suspect appearing at a house to meet 
To Catch a Predator host Chris Hansen.^"^^ However, what if an adult engages 
in a sexually charged online chat with an officer pretending to be a child online 
but never sets up a meeting? In Kuypers v. State,^^^ the court of appeals made 
clear "[n] either a meeting nor an immediate request [to meet] is necessary to 
complete the crime of child solicitation because it is the mere exposure of 
children to such solicitations that the statute seeks to avoid."^'^'^ Kuypers 
addressed only a challenge to the sufficiency of the evidence and focused on the 
statutory definition of the term "solicit," which means "to command, authorize, 
urge, incite, request, or advise an individual" to engage in a sex act.^"^^ Kuypers 
seemingly gives the green light to law enforcement officers and prosecutors to 
obtain records from Internet service providers to track down those who engage 
in such sexually charged chats. Based on these records, law enforcement may 
then secure a warrant to search suspects' computers, if not arrest them.^"^^ 

In Aplin v. State,^'^^ the court reversed a conviction for attempted sexual 
misconduct with a minor that resulted from a man chatting with a detective 
pretending to be a fifteen-year-old girl ("glitterkatie2010") online and then 
driving to an arranged meeting for a sexual encounter. ^"^^ Although the court 
affirmed the child solicitation conviction, "whereby the State need not prove the 
actual age of the victim but may prove the solicitor's belief that the solicitee is 
a minor,"^"^^ sexual misconduct with a minor requires an actual minor aged 
fourteen or fifteen — not an adult pretending to be a child.^^^ The problem with 

241. Id. 

242. See generally Brian Stelter, "To Catch a Predator" Is Falling Prey to Advertisers' 
Sensibilities, N.Y. TIMES, Aug. 27, 2007, at CI. 

243. 878 N.E.2d 896 (Ind. Ct. App.), trans, denied, 891 N.E.2d 42 (Ind. 2008). 

244. Id. at 899 (internal quotations omitted). 

245. Id at 898 (quoting iND. CODE § 35-42-4-6(a) (2006)). 

246. No claim was raised about the possible vagueness of this statute, i.e., whether the statute 
defines the offense with "sufficient definiteness that ordinary people can understand what conduct 
is prohibited and in a manner that does not encourage arbitrary and discriminatory enforcement." 
Healthscript v. State, 770 N.E.2d 810, 815-16 (Ind. 2002) (quoting Kolender v. Lawson, 461 U.S. 
352, 357 (1983)). 

247. 889 N.E.2d 882 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1231 (Ind. 2008). 

248. /J. at 883. 

249. Id. at 884-85. 

250. Id. at 884. Any future attempted sexual misconduct or attempted child molest 

962 INDIANA LAW REVIEW [Vol. 42:937 

using mere speech as a substantial step for a crime was aptly summarized in a 
recent opinion from Judge Posner of the Seventh Circuit: 

Treating speech ... as the "substantial step'' would abolish any 
requirement of a substantial step. It would imply that if X says to K, "I'm 
planning to rob a bank," X has committed the crime of attempted bank 
robbery, even though X says such things often and never acts. The 
requirement of proving a substantial step serves to distinguish people 
who pose real threats from those who are all hot air; in the case of 
Gladish, hot air is all the record shows.^^^ 

H. Crime or Not a Crime ? 

Challenges to the sufficiency of the evidence are generally regarded as a 
losing cause. If a jury or judge finds a defendant guilty, the standard of review 
for reversing the conviction is a high hurdle to clear.^^^ As the following cases 
demonstrate, though, Indiana's appellate courts do reverse convictions based on 
insufficient evidence. This often occurs in opinions that are written in ways that 
suggest the issue is a legal one with broader applicability than the facts of the 
particular case. 

In Henley v. State, ^^^ the supreme court found insufficient evidence to uphold 

prosecutions could presumably be dismissed based on Aplin and prior case law if: (1) no victim 
under sixteen is involved or (2) the defendant merely drives to a meeting point, because driving to 
meet is not a substantial step. In State v. Kemp, 753 N.E.2d 47 (Ind. Ct. App. 2001), the court of 
appeals concluded: 

[T]he State alleged in its charging information that Kemp had committed a substantial 
step toward the offense of child molesting when he agreed to meet "Brittney4u2" at a 
restaurant parking lot, drove there, and brought some condoms with him. Under these 
circumstances, we observe that the facts alleged in the information do not reach the level 
of an overt act leading to the commission of child molesting. At most, such allegations 
only reach the level of preparing or planning to commit an offense. Were we to conclude 
otherwise, there would be no limit on the reach of "attempt" crimes. As a result, we 
conclude that the trial court properly granted Kemp's motion to dismiss the two child 
molesting counts. 
Id. at 51 (citation omitted). 

251. United States v. Gladish, 536 F.3d 646, 650 (7th Cir. 2008). 

252. See generally McHenry v. State, 820 N.E.2d 124, 126 (Ind. 2005) ("Upon a challenge 
to the sufficiency of evidence to support a conviction, a reviewing court does not reweigh the 
evidence or judge the credibility of the witnesses, and respects 'the jury's exclusive province to 
weigh conflicting evidence.' We have often emphasized that appellate courts must consider only 
the probative evidence and reasonable inferences supporting the verdict. Expressed another way, 
we have stated that appellate courts must affirm 'if the probative evidence and reasonable inferences 
drawn from the evidence could have allowed a reasonable trier of fact to find the defendant guilty 
beyond a reasonable doubt.'") (footnotes omitted). 

253. 881 N.E.2d 639 (Ind. 2008). 

2009] CRIMINAL LAW 963 

an attempted murder conviction.^^"^ In Henley, the defendant fired his gun in the 
dark toward a large dog he believed was attacking him. There was no evidence 
that he was pointing his firearm at a police officer when he fired it.^^^ The court 
included a helpful string cite of distinguishable cases where evidence of 
attempted murder has been found sufficient: 

Shelton v. State, 602 N.E.2d 1017, 1021 (Ind. 1992) (Defendant pointed 
handgun at victim and shot him twice from a distance of twelve and 
thirty feet.); Davis v. State, 558 N.E.2d 811,811 (Ind. 1990) (Defendant 
ran from police, turned, and fired a shot which struck an automobile 
directly behind the police officer.); Parks v. State, 513 N.E.2d 170, 171 
(Ind. 1987) (Defendant pointed a loaded shotgun at the officer's 
midsection and said, "You're dead."); Brumbaugh v. State, 491 N.E.2d 
983, 984 (Ind. 1986) (Defendant fired a shotgun at a police helicopter 
and an officer testified that a shot "whizzed" by his head.); Conley v. 
State, 445 N.E.2d 103, 105 (Ind. 1983) (Defendant fired at police officer 
striking the radiator of the patrol car that acted as shield.). ^^^ 

In A.B. V. State,^^^ the supreme court vacated several harassment 
adjudications against a juvenile who posted derogatory statements about a middle 
school principal.^^^ Three adjudications were vacated because the messages were 
part of a "private profile" site, viewable only by those users accepted as 
"friends."^^^ The principal gained access to the site only through a student during 
his investigation. Therefore, there was no evidence the respondent expected the 
principal to see the messages on the private site.^^^ Although other comments 
were posted on a "group" page, the court found insufficient proof of "no intent 
of legitimate communication" because the messages merely criticized the 
principal's earlier disciplinary action.^^^ 

In Scruggs v. State,^^^ the court of appeals reversed a conviction for neglect 
of a dependent based on evidence that a mother left her seven-year-old son at 
home alone for as long as three hours while running an errand. ^^^ The court 
reiterated that a neglect conviction requires exposing a child to an actual and 
appreciable danger to life or health. ^^"^ Although the defendant may have 
demonstrated "bad judgment," the State did not prove a "subjective awareness 

254. Mat 652-53. 

255. Mat 652. 

256. Mat 653. 

257. 885 N.E.2d 1223 (Ind. 2008). 

258. M. at 1228. 

259. M. at 1227. 

260. Id. 

261. Id. 

262. 883 N.E.2d 189 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1221 (Ind. 2008). 

263. Id. at 191. 

264. Id. 

964 INDIANA LAW REVIEW [Vol. 42:937 

of a high probability that she had placed [the child] in a dangerous situation. "^^^ 
Under Indiana law, stalking requires that a defendant (1) knowingly or 
intentionally (2) engaged in a course of conduct involving repeated or continuing 
harassment of the victim, (3) that would cause a reasonable person to feel 
terrorized, frightened, intimidated, or threatened, and (4) that actually caused the 
victim to feel terrorized, frightened, intimidated, or threatened.^^^ Stalking does 
not include statutorily or constitutionally protected activity.^^^ In VanHom v. 
State, ^^^ the charged conduct was merely parking near the victim's house on four 
separate occasions and looking at the victim's house through binoculars on two 
of those occasions.^^^ In finding insufficient evidence, the court emphasized the 
due process right to be on a public street and focused on the absence of a 
protective order, which would have given the defendant notice that his conduct 
was impermissible.^''^ 

In Bell V. State, ^^^ the court of appeals reduced three counts of Class A felony 
dealing to Class B felonies based on Indiana Code section 35-48-4- 16(c).^^^ That 
statute creates a defense when a defendant charged with a drug offense is within 
1 ,000 feet of a park or other location "at the request or suggestion of ... an agent 
of a law enforcement officer. "^^^ In Bell, detectives directed a confidential 
informant (CI) to call the defendant to arrange to purchase drugs. ^^"^ The CI 
asked the defendant to come to his apartment, which was across the street from 
a park. The court rejected the State's argument that the defendant "was free to 
drive to another location to conduct the drug deal" and that there was no evidence 
he was "tricked" into selling drugs within 1,000 feet of a park.^^^ 

Public intoxication convictions have long been upheld against drunk 
passengers in vehicles on public roads. Not surprisingly, in Jones v. State ^^^ the 
court of appeals reversed a public intoxication conviction against a woman who 
was sitting in a vehicle parked on private property; no one saw her in an 
intoxicated state in a public place.^^^ In a footnote, however, the court questioned 

whether it serves the purpose of the statute to convict persons of public 
intoxication who are passengers in a private vehicle traveling on a public 
road .... It also is difficult to perceive the public policy behind 

265. Id. 

266. IND. CODE § 35-45-10-1 (2008). 

267. Id. 

268. 889 N.E.2d 908 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1225 (Ind. 2008). 

269. Mat 911. 

270. Mat 912-14. 

271. 881 N.E.2d 1080 (Ind. Ct. App.), trans, denied, 891 N.E.2d 48 (Ind. 2008). 

272. Id. at 1086-88. 

273. Id. at 1086 (quoting iND. CODE § 35-48-4-16(c) (2006)). 

274. Id. 

275. Mat 1086-87. 

276. 881 N.E.2d 1095 (Ind. Ct. App. 2008). 

277. Id. at 1098. 

2009] CRIMINAL LAW 965 

criminalizing riding in (as opposed to driving) a private vehicle in a state 
of intoxication. In fact, perhaps the better public policy would be to 
encourage persons who find themselves intoxicated to ride in a vehicle 
to a private place without fear of being prosecuted for a crime.^^^ 

Although dicta, the footnote in Jones provides a strong argument for an 
intoxicated passenger to challenge a public intoxication conviction in the future. 

In other cases, however, the court found sufficient evidence in opinions that 
could apply fairly broadly beyond the narrow facts of the cases. In Nash v. 
State ^^^ an HIV-positive inmate threw a cup of his urine and excrement at a nurse 
who was passing by his cell; it landed on her shoes. ^^^ He was charged with 
battery by body waste, which requires placing body fluid or waste on a 
"corrections officer."^^^ Indiana Code section 35-42-2-6(a) defines a "corrections 
officer" to include "persons employed by (1) the department of correction; (2) a 
law enforcement agency; (3) a probation department; (4) a county jail; or (5) a 
circuit, superior, county, probate, city, or town court."^^^ Although the nurse was 
employed by a staffing agency and not the DOC, the court nevertheless upheld 
the conviction based on who it believed the legislature "intended" to protect,^^^ 

In Zitlaw v. State,^^"^ the court of appeals addressed several challenges to a 
charge of performance harmful to minors. Indiana Code section 35-49-3-3(5) 
criminalizes "engag[ing] in or conduct[ing] a performance that is harmful to 
minors in an area to which minors have visual, auditory, or physical access, 
unless each minor is accompanied by the minor's parent or guardian."^^^ The 
offense is a Class D felony, but there is very little case law about it. 

The court of appeals' s majority in the 2-1 decision affirmed the denial of the 
motion to dismiss. ^^^ The court reasoned the statute merely requires that children 
have "access" to the area; there need not be actual children anywhere nearby.^^^ 
Judge Riley dissented, believing that the statute requires "the actual presence of 

278. Id. at 1098 n.2. 

279. 881 N.E.2d 1060 (Ind. Ct. App.), trans, denied, 891 N.E.2d 49 (Ind. 2008). 

280. /J. at 1062. 

281. Id. (citing iND. CODE § 35-42-2-6(a), (e) (2008)). 

282. Ind. Code § 35-42-2-6(a) (2008). 

283. Nash, 881 N.E.2d at 1063-64. Nash seems to conflict with Indiana Supreme Court 
precedent, which has emphasized that penal statutes must be strictly construed against the State. 
For example, the court recently held that a bus driver working as an independent contractor for a 
school was not a "child care worker" under the child seduction statute. Smith v. State, 867 N.E.2d 
1286, 1287-89 (Ind. 2007) ("A long-cherished principle of the American justice system is that a 
citizen may not be prosecuted for a crime without clearly falling within the statutory language 
defining the crime."). 

284. 880 N.E.2d 724 (Ind. Ct. App.), trans, denied, 891 N.E.2d 45 (Ind. 2008). This author 
was co-counsel for Mr. Zitlaw on appeal. 

285. Ind. Code § 35-49-3-3(5) (2006). 

286. Z/r/flw, 880 N.E.2d at 732. 

287. Id. 

966 INDIANA LAW REVIEW [Vol. 42:937 

minors" and therefore any information would need to allege the name of at least 
one minor who saw or heard the performance and was unaccompanied by a 
parent or guardian. ^^^ She also expressed concern that, for example, a married 
couple having sex in a tent in the wilderness could be prosecuted under the 
majority's interpretation. ^^^ 

The court of appeals' s interpretation wholly writes the term "minor" — in its 
many uses — out of the statute. Although one part of the statute mentions areas 
where minors have "access," several other parts mention performances "before 
minors" or performances harmful "to minors. "^^° Although the supreme court 
denied transfer (3-2), the opinion is difficult to reconcile with recent authority 
interpreting criminal statutes strictly against the State.^^* Finally, as discussed 
in the American Civil Liberties Union of Indiana amicus brief in support of 
Zitlaw's petition, the court of appeals' s interpretation would criminalize a vast 
array of protected activity, including (1) "a married couple that engages in sex 
behind closed doors in the marital bedroom, to which children have access, 
although they are downstairs watching a movie," (2) "two adults view[ing] a 
pornographic, but not obscene, picture in a park, where no children are actually 
present," and (3) adults "sitting in a private home, after putting the children, 
including visiting children not related to the adults, to sleep, engaging in a 
discussion of the merits of American as opposed to English erotic, but not 
obscene, literature while reading aloud lascivious portions" of classic novels.^^^ 

In M.S. V. State, ^^^ a juvenile was found delinquent for driving a vehicle that 
was playing a "DVD depicting nudity and sexual conduct" on a fifteen-inch 
screen mounted in the rearview window. ^^"^ Adhering to Zitlaw, which held 
"[u]nder the clear and unambiguous definition of 'access,' the minor need not be 
present,"^^^ the court affirmed the adjudication because the public street was an 
area in which minors had "both auditory and visual access."^^^ 

288. Id. at 733 (Riley, J., dissenting). 

289. Id. 

290. IND. Code § 35-49-3-3 (2006). 

291. See, e.g.. Brown v. State, 868 N.E.2d 464, 470 (Ind. 2007) (concluding that identity 
deception requires a person to use the identifying information of an existing human being); Smith 
V. State, 867 N.E.2d 1286, 1289 (Ind. 2007) (holding a bus driver working as an independent 
contractor is not a "child care worker"). 

292. Brief for ACLU of Indiana as Amicus Curiae Supporting Petitioner, Zitlaw v. State, 880 
N.E.2d 724 (Ind. Ct. App. 2008), (No. 29A05-0701-CR-35, at 5-6), 2008 WL 1994264; see also 
supra notes 58-63 and accompanying text (discussing Big Hat Books case). 

293. 889 N.E.2d 900 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1225 (Ind. 2008). 

294. /^. at 901. 

295. /J. at 903. 

296. Id. 

2009] CRIMINAL LAW 967 

/. Plea Agreement Views 

Owens V. State^^^ is an unusual case in which the prosecutor included the 
following language regarding sentence modifications in the plea agreement: 

The parties agree that this Plea Agreement will not operate as a waiver 
of Defendant's right to seek sentence modification within 365 days of 
sentencing pursuant to I.C. 35-38-1 -17(a), and the Prosecuting Attorney 
consents and approves further filings of petitions for sentence 
modification thereafter under I.C. 35-38-l-17(b), provided, however, 
nothing in this agreement shall foreclose the State of Indiana from 
objecting to any modification of sentence. ^^^ 

The court of appeals, in a split decision, concluded the "only sensible 
interpretation of the 'consents and approves' language is an interpretation 
meaning that the State waived its right to approve Owens' petition for sentence 
modification and has not forfeited its right to object to such a modification."^^^ 
Therefore, because the trial court concluded it had no discretion to rule on the 
motion without the State's consent, the court reversed and remanded for the trial 
court to exercise its discretion in ruling on the motion.^^^ 

Tubbs V. State^^^ reiterates that, unless a plea agreement affords the court 
discretion in fixing the terms of probation, trial courts may not impose conditions 
that "materially add to the punitive obligation. "^^^ There, the plea agreement 
included the following two provisions: ( 1 ) "That the court may impose whatever 
sentences it deems appropriate except said sentences shall be served concurrently 
with each other and the executed portion, if any, shall not exceed nine years. 
Both sides may argue sentencing" and (2) "[t]hat, as a condition for any 
suspended sentence or probation, the defendant shall testify truthfully if called 
upon to do so."^°^ The defendant was sentenced to nine years at DOC followed 
by three years at Community Corrections. ^^"^ The court of appeals vacated the 
three-year community correction sentence because it was "an additional 
substantial obligation of a punitive nature not authorized by the plea 
agreement. "^^^ 

Finally, Indiana Code section 35-35-1 -4(b) is seldom used but is an important 
vehicle to relief if new facts or legal developments ("any fair and just reason") 
come to light after a guilty plea but before sentencing. ^^^ A motion for relief 

297. 886 N.E.2d 64 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1216 (Ind. 2008). 

298. Id. at 66. 

299. Id. 2X61. 

300. Id. at 68. 

301. 888 N.E.2d 814 (Ind. Ct. App. 2008). 

302. Id. at 816 (quoting Freije v. State, 709 N.E.2d 323, 325 (Ind. 1999)). 

303. /J. at 817. 

304. /J. at 815. 

305. /J. at 817. 

306. Ind. Code § 35-35-l-4(b) (2008). 

968 INDIANA LAW REVIEW [Vol. 42:937 

from a guilty plea under that statute must be in writing, include specific facts in 
support of the relief desired, and be verified.^^^ In Craig v. State, ^^^ the court of 
appeals held the defendant should have been allowed to withdraw his guilty plea 
to an habitual offender enhancement entered into after a jury found him to be a 
serious violent felon (SVF) but before sentencing.^^^ The request in Craig was 
made shortly after the Indiana Supreme Court held in Mills v. State^^^ that the 
same felony cannot be used both to establish a defendant as a SVF and as one of 
the predicate felonies for the habitual offender enhancement.^*^ Based on this 
favorable change in the law, the court held the defendant should have been 
allowed to withdraw his guilty plea.^*^ 

J. Jury Instructions 

Both the supreme court and court of appeals issued important decisions 
regarding jury instructions for a number of different situations and offenses. 

In McDowell v. State, ^^^ the Indiana Supreme Court found the following 
instruction improper in a voluntary manslaughter case: "The intent to kill may 
be inferred from evidence that a mortal wound was inflicted upon an unarmed 
person with a deadly weapon in the hands of the accused."^ ^"^ Voluntary 
manslaughter requires the (a) knowing or intentional (b) killing (c) of another 
person (d) by means of a deadly weapon.^*^ The court reversed because the trial 
court's instruction alleviated the State of its obligation to prove the required 
intent element.^ *^ 

In Watts V. State, ^^^ the supreme court made clear that a voluntary 
manslaughter instruction cannot be given over the defendant's objection when 
there is no evidence of sudden heat.^*^ Defendants may pursue an ''all-or- 
nothing" (murder or acquittal) strategy and adding an intermediate option 
"deprives the defendant of the opportunity to pursue a legitimate trial 

In Harris v. State, ^^^ the court of appeals held that trial courts must instruct 
juries that a specific intent to kill is required in an attempted voluntary 

307. Id. 

308. 883 N.E.2d 218 (Ind.Ct.App. 2008). 

309. Mat 224. 

310. 868 N.E.2d 446 (Ind. 2007). 

311. Mat 450. 

312. Cra/g, 883 N.E.2d at 222. 

313. 885 N.E.2d 1260 (Ind. 2008). 

314. Mat 1261-62. 

315. Ind. Code § 35-42-l-3(a) (2008). 

316. McDow//, 885 N.E.2d at 1264. 

317. 885 N.E.2d 1228 (Ind. 2008). 

318. Mat 1233. 

319. Id. 

320. 884 N.E.2d 399 (Ind. Ct. App.), trans, denied, 891 N.E.2d 53 (Ind. 2008). 

2009] CRIMINAL LAW 969 

manslaughter trial. ^^^ Although intent to kill has long been required in attempted 
murder cases, the Indiana Supreme Court appeared to limit the requirement of 
specific intent to attempted murder cases in Richeson v. State,^^^ which held no 
specific intent was required in a battery case.^^^ The holding of Harris is a 
narrow one because attempted voluntary manslaughter is the same class felony 
as attempted murder and involves the same "intent ambiguity" as attempted 
murder. ^^"^ 

In Surber v. State, ^^^ the court of appeals suggested the following jury 
instruction may have been inappropriate in a child molesting case: "Any sexual 
penetration, however slight, may be sufficient to complete the crime of child 
molestation."^^^ The mere existence of language in an appellate opinion does not 
make it appropriate for a jury instruction.^^^ Adding language reminding the jury 
that "the other elements are proved" may be more appropriate in such an 
instruction.^^^ Nevertheless, the court found the instructions as a whole did not 
mislead the jury.^^^ 

The court of appeals confronted the propriety of jury instruction in rape cases 
in which the victim was under the influence of alcohol or drugs. In Newbill v. 
State, ^^^ the court of appeals disapproved an instruction that told the jury to focus 
on the "victim's perspective, not the assailant's" in determining forceful 
compulsion.^^^ The court concluded instead "the 'perspective' for a jury's 
consideration of the evidence of forceful compulsion in a rape trial might better 
be described as either the 'objective perspective of the victim' or the 'reasonable 
perspective of the victim. '"^^^ In Gale v. State, ^^^ the court reiterated that 
defendants in such cases must be aware of a high probability that the victim was 
unaware that sexual intercourse was occurring.^^"^ 

K. Probation 

Finally, the appellate courts issued several opinions regarding various aspects 
of probation, including the requisite notice, the contours of "strict compliance" 
probation, and restitution. 

321. Mat 404. 

322. 704 N.E.2d 1008 (Ind. 1998). 

323. Harris, 883 N.E.2d at 403-04. 

324. Id. 

325. 884 N.E.2d 856 (Ind. Ct. App.), trans, denied, 891 N.E.2d 49 (Ind. 2008). 

326. /J. at 886-87. 

327. Id. at 867; accord Schumm III, supra note 208, at 1010-11. 

328. Surber, 884 N.E.2d at 867. 

329. /J. at 868. 

330. 884 N.E.2d 383 (Ind. Ct. App.), trans, denied, 891 N.E.2d 51 (Ind. 2008). 

331. Mat 393. 

332. Id. 

333. 882 N.E.2d 808 (Ind. Ct. App. 2008). 

334. Mat 816. 

970 INDIANA LAW REVIEW [Vol. 42:937 

In Hunter v. State,^^^ the supreme court held that "contact" as used in 
standard sex offender probation conditions 'lacked sufficient clarity to provide 
the defendant with fair notice that the conduct at issue would constitute a 
violation of probation."^^^ There, the defendant was working inside his sister's 
mobile home on several occasions when her children returned home from school. 
He immediately packed up his tools and left, not interacting in any way with the 
children. The court rejected the State's argument that merely being in the 
presence of children qualified as "contact."^^^ 

The opinion seems to suggest that trial courts could cure the vagueness 
problem by rewording the conditions of probation to include a broader definition 
similar to the one urged by the State; the defendant would then seemingly have 
clear notice. However, this may create the problem noted in Piercefield v. 
State,^^^ which held that restrictions on incidental contact are overly broad.^^^ 
Piercefield was remanded to revise the condition to prohibit the defendant from 
"being alone with or initiating contact" with children. ^"^^ 

In Woods V. State,^"^^ the trial court denied a defendant on "strict compliance" 
probation an opportunity to explain the violations. ^"^^ The Indiana Supreme Court 
concluded "the very notion that violation of a probationary term will result in 
revocation no matter the reason is constitutionally suspect."^"^^ A defendant may 
have failed to pay probation fees because he was unable to pay or failed a drug 
test because of drugs prescribed by his physician. Even with "strict compliance" 
probation, due process requires that a defendant be given the opportunity to 
explain why even a "final chance" is deserving of further consideration.^"^"^ 

Both the supreme court and court of appeals reiterated some important 

335. 883 N.E.2d 1161 (Ind. 2008). 

336. /J. at 1164. 

337. Id. Following Hunter, in Richardson v. State, 890 N.E.2d 766 (Ind. Ct. App. 2008), the 
court of appeals reiterated that probation conditions must provide "sufficient clarity to provide the 
defendant with fair notice that the conduct at issue would constitute a violation of probation." Id. 
at 769 (quoting Hunter, 883 N.E.2d at 1 161). Specifically, the court concluded the defendant had 
reported within three working days as required when he called his probation officer on a 
Wednesday after his release on a Friday. The court further found that he could not be found in 
violation for living with his parents in Kentucky when he had not been advised of any travel 
restrictions. Id. at 768-69. 

338. 877 N.E.2d 1213 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 34 (Ind. 2008). 

339. Id. at 1219. 

340. Id. 

341. 892 N.E.2d 637 (Ind. 2008). 

342. Id. at 641. 

343. Id. 

344. Id. Although Woods announces an important rule for future cases, the revocation of 
probation was nevertheless affirmed because the defendant made no offer of proof that would have 
enabled "both the trial court and the appellate court to determine the admissibility of the testimony 
and the prejudice which might result if the evidence is excluded." Id. at 641-42 (quoting Wiseheart 
V. State, 491 N.E.2d 985, 991 (Ind. 1986)). 

2009] CRIMINAL LAW 971 

principles regarding restitution. In Pearson v. State,^"^^ the Indiana Supreme 
Court held that when a trial court orders restitution as a condition of probation 
or a suspended sentence, it must inquire into the defendant's ability to pay.^"^^ 
This is necessary to prevent indigent defendants from being incarcerated because 
of their inability to pay.^"^^ When restitution is ordered as part of an executed 
sentence, however, the trial court does not need to inquire into the defendant's 
ability to pay.^"^^ Restitution then is merely a money judgment, and a defendant 
cannot be imprisoned for non-payment.^"^^ 

The probation statutes impose limitations on restitution. For crimes 
involving harm to property, a trial court "shall base its restitution order upon a 
consideration of . . . property damages of the victim incurred as a result of the 
crime, based on the actual cost of repair (or replacement if repair is 
inappropriate). "^^° In Rich v. State,^^^ the court of appeals reasoned in a burglary 
case that the "break-in damaged many things; however, a security system was not 
one of them."^^^ The trial court could not order the defendant to pay for a new 
security system. Because the victims owned no security system, "their 
installation of a security system is not a 'repair' to their home, but an upgrade or 
improvement. Indeed, the victims' home is now protected from future, unrelated 
break-ins, and their home is in a better condition than before Rich's break-in."^^^ 

In Lohmiller v. State,^^^ the court of appeals vacated a $25,000 restitution 
order payable to the county general fund against a defendant who had been 
employed as a county nurse before being convicted of forgery and practicing 
nursing without a license. ^^'^ Restitution awards must be based on the amount of 
actual loss suffered by a victim, which may only be determined by the 
presentation of evidence.^^^ The order was improper there because the State had 
not argued the county was a victim, nor had it submitted any evidence of actual 
damages. ^^^ 

Finally, in Miller v. State, ^^^ the court of appeals reiterated that trial courts 
may not order payment of money as a condition of probation without inquiring 

345. 883 N.E.2d 770 (Ind. 2008). 

346. Id. at 772. 

347. Id.2i\.ll?>. 

348. Id. 

349. Id. 

350. Ind. Code § 35-50-5-3(a) (2008). 

351. 890 N.E.2d 44 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1223 (Ind. 2008). 

352. Id. at 52. 

353. Id. 

354. 884 N.E.2d 903 (Ind. Ct. App. 2008). 

355. /J. at 916. 

356. Id. 

357. Mat 917. 

358. 884 N.E.2d 922 (Ind. Ct. App.), reh 'g granted on other grounds, 89 1 N.E.2d 58 (Ind. Ct. 
App.), trans, denied, 898 N.E.2d 1224 (Ind. 2008). 

972 INDIANA LAW REVIEW [Vol. 42:937 

into the defendant's ability to pay.^^^ This is to prevent defendants from being 
incarcerated because of their inability to pay.^^^ Trial courts may, however, enter 
a money judgment against defendants without inquiring into the ability to pay.^^^ 

359. Id. at 930. 

360. Id. 

361. Id. 

2007-2008 Environmental Law Survey: 
A System in Flux 

Freedom S.N. Smith* 

Jennifer Andres** 

Angela Krahulik*** 


Here, we survey the federal and state court decisions decided between 
October 1, 2007, and September 30, 2008, that are most likely to affect the 
Indiana environmental law practitioner.^ 

Perhaps more than most years, this year's survey period finds the state of 
environmental law in significant flux. Key cases affecting the Clean Air Act 
(CAA),^ environmental remediation, and other areas have been decided, or are 
pending, at the state and federal level that leave some fundamental issues 
unresolved and promise heated debate in the near future. As we explain in Part 
I, several rules promulgated under the CAA have been successfully challenged 
during the survey period, calling into question emission practices and regulations 
across the country. In addition. Part 11 examines key Indiana state court decisions 
addressing issues of first impression pertaining to the accrual of state law claims 
for environmental damages. Part IQ considers the impact of decisions that may 
impose new restrictions on the ability to recover costs for the remediation of 
environmental contamination, or to bring citizen suits, under certain federal 

* Associate, Ice Miller LLP, Indianapolis. B.A., cum laude, 2001, DePauw University, 
Indiana; J.D., cum laude, 2004, Indiana University School of Law — Bloomington. 

** Associate, Ice Miller LLP, Indianapolis. B.S., 1996, Indiana University; J.D., 2003, 
Indiana University School of Law — Indianapolis. 

*** Associate, Ice Miller LLP, IndianapoHs. B.A., 1997, Indiana University; J.D., summa cum 
laude, 2001, Indiana University School of Law — Indianapolis. 

1 . For additional decisions that could not be addressed here but that may nonetheless be of 
interest, see Citizens Against Ruining the Environment v. EPA, 535 F.3d 670 (7th Cir. 2008) 
(examining the EPA rule issued under the Clean Air Act), reh 'g denied; Defenders of Wildlife v. 
Gutierrez, 532 F.3d 913 (D.C. Cir. 2008) (examining compliance with the National Environmental 
Policy Act (NEPA)); Michigan Gambling Opposition v. Kempthome, 525 F.3d 23 (D.C. Cir. 2008) 
(same), cert, denied, 129 S. Ct. 1002 (2009); Duncan ' s Point Lot Owners Associates Inc. v. Federal 
Energy Regulatory Commission, 522 F.3d 371 (D.C. Cir. 2008) (holding that the Federal Energy 
Regulatory Commission did not need an impact statement when determining remedial action plan 
for a dam operator); American Bird Conservancy, Inc. v. FCC, 516 F.3d 1027 (D.C. Cir. 2008) 
(holding that the FCC improperly denied a petition for an impact statement regarding the effect of 
communications towers on migratory birds); Lemon v. Geren, 514 F.3d 1312 (D.C. Cir. 2008) 
(examining compliance with NEPA); Nuclear Information and Resource Service v. Nuclear 
Regulatory Commission, 509 F.3d 562 (D.C. Cir. 2007) (considering NEPA challenge); City of 
Portland v. EPA, 507 F.3d 706 (D.C. Cir. 2007) (upholding the EPA's Safe Drinking Water Act 
rules regarding the parasite Cryptosporidium). 

2. Clean Air Act, 42 U.S.C. §§ 7401-7515 (2006). 

974 INDIANA LAW REVIEW [Vol. 42:973 

environmental laws. Finally, Part IV examines various cases that may impact the 
practice of environmental law in Indiana on issues of insurance, nuisance, 
damages, water rights, and hog farm operations. 

I. Challenges TO Clean Air Act Rules: A Need to 
Revisit Regulations 

In many ways, CAA lawsuits held center stage during this survey period. As 
we discuss below, the U.S. Environmental Protection Agency (EPA) faced highly 
publicized — and successful — challenges to its CAA rulemaking in several areas: 
the regulation of hazardous air pollutants (HAPs) emissions, the regulation of 
interstate pollutant emissions, and the EPA's restrictions against the creation of 
additional state and local monitoring requirements for CAA permit holders. 
Thus, the EPA and many states, including Indiana, must now revisit their air 
quality regulations, providing stakeholders on every side another opportunity to 
influence how these new rules will be written. 

A. Regulatory Framework of the Clean Air Act 

The CAA requires the EPA to establish National Ambient Air Quality 
Standards (NAAQS) for listed pollutants found in ambient air as a result of 
stationary or mobile sources and that "cause or contribute to air pollution which 
may reasonably be anticipated to endanger public health or welfare."^ The EPA, 
so far, has set NAAQS for the following six pollutants, referred to as "criteria" 
pollutants: sulfur dioxide, particulate matter, carbon monoxide, ozone, nitrogen 
dioxide, and lead."^ The CAA also requires the EPA to divide the country into 
areas designated as "non attainment," "attainment," or "unclassifiable" for each 
air pollutant, indicating whether the area meets the NAAQS. ^ 

Once the EPA sets the NAAQS, each state must develop and submit to the 
EPA for its approval a state implementation plan (SIP) that establishes how the 
state will meet the NAAQS for each air pollutant.^ Under the CAA, the SIP must 
contain adequate provisions that prohibit any source within the state from 
emitting an air pollutant that will "contribute significantly" to non attainment in, 
or will interfere in maintenance by, any other state's compliance with NAAQS. ^ 
A state is either deemed to be in attainment with the NAAQS — meaning it meets 
the pollutant level set by the EPA — or in non-attainment — meaning it does not 
meet the NAAQS. ^ As discussed below, different permit programs apply to 

3. Clean Air Act §§ 108(a)(1)(A) & (B), 42 U.S.C. §§ 7408(a)(1)(A) & (B) (2006). 

4. See National Primary and Secondary Ambient Air Quality Standards, 40 C.F.R. §§ 50.4- 
50.12 (2008); see also Six Common Air Pollutants, (last visited 
Aug. 16, 2009). 

5. Clean Air Act §§ 107(c) & (d); 42 U.S.C. §§ 7407(c) & (d) (2006). 

6. North Carolina v. EPA, 531 F.3d 896, 901-02 (D.C. Cir.) (citing 42 U.S.C. §§ 7407(a), 
7410 (2006)), reh 'g granted in part, 550 F.3d 1 176 (D.C. Cir. 2008). 

7. Id. at 902 (citing 42 U.S.C. § 7410(a)(2)(D)(i)(I) (2006)). 

8. Id. 


sources in areas based on whether they are in an area in attainment, or not in 
attainment, with the NAAQS. 

Besides requiring state compliance with NAAQS and each state's respective 
SIP, the CAA also addresses individual air pollution sources through the 
regulation of specific industries. The CAA does so through New Source 
Performance Standards (NSPS) that require the installation of the "best available 
control technology" (BACT) for any new source of air pollution within the 
designated industry and the use of "reasonably available control technology" 
(RACT), after considering technological and economic feasibility, for existing 
major stationary sources of pollution in non-attainment areas. ^ The NSPS 
provides that major stationary sources and major sources implementing major 
modifications^^ are required to comply with standards set out in either the New 
Source Review (NSR) or Prevention of Significant Deterioration (PSD) permit 
programs.^ ^ The NSR standards apply to major sources in areas not in attainment 
with NAAQS; the PSD standards are applied to major sources in areas where 
emissions are in attainment with NAAQS. ^^ The goal of the NSR program is to 
reduce the aggregate level of criteria pollutants in non-attainment areas by 
preventing new pollution sources that are not offset by the closing of, or 
reduction in pollution from, an existing source. ^^ The PSD program seeks to 
maintain attainment status for each criteria pollutant in the area thereby 
preventing any deterioration of air quality. ^"^ 

The CAA further addresses individual air pollution sources through the 
regulation of releases of hazardous air pollutants (HAPs) — less widely emitted, 
but highly dangerous, hazardous, or toxic pollutants that are not covered by the 
NAAQS or SIPs.^^ Section 112 of the CAA requires the EPA to regulate the 
emissions of HAPs based upon either the EPA or congressional determination 
that HAPs have the potential to cause serious health consequences.^^ Over one 
hundred pollutants have been determined by the EPA to be HAPs. The EPA is 
required to list all major sources of HAPs and establish an emission standard^^ 

9. Clean Air Act §§ 169(3), 172-73, 42 U.S.C. §§ 7479(3), 7503 (2006). 

10. A "modified" source is one that has any physical change or process change that increases 
a criteria pollutant emission by more than a de minimis amount. Clean Air Act § 1 1 1(a), 42 U.S.C. 
§ 7411(a)(4) (2006). 

11. Clean Air Act §§ 160-69, 171-93, 42 U.S.C. §§ 7501-7515, 7470-7492 (2006). 

12. See sources cited supra note 12. 

13. Id. 

14. Id. 

15. Clean Air Act § 1 12, 42 U.S.C. § 7412 (2006). 

16. Id. 

1 7 . The Clean Air Act defines "emission standard" as "a requirement established by the State 
or the Administrator which limits the quantity, rate, or concentration of emissions of air pollutants 
on a continuous basis, including any requirement relating to the operation or maintenance of a 
source to assure continuous emission reduction, and any design, equipment, work practice or 
operational standard promulgated under this chapter." Clean Air Act § 302(k), 42 U.S.C. § 7602(k) 

976 INDIANA LAW REVIEW [Vol. 42:973 

for each HAP that requires the maximum degree of reductions in emissions, 
taking into consideration the cost of achieving such emission reduction, and any 
non-air quahty health and environmental impacts and energy requirements.^^ 
These emission controls are typically referred to as the maximum achievable 
control technology (MACT) standards.*^ Once the EPA has listed a source of 
HAP under section 112, the EPA has a limited ability to remove a source unless 
it makes a determination that the emissions of the source are adequate to protect 
public health and no adverse environmental effect will result from the source 

B. Regulation of Mercury Emissions by Electric Utility 
Generating Units: Starting Over 

New Jersey v. EPA^^ a highly visible case, involved a challenge to two rules 
promulgated by the EPA under the CAA provision that regulated HAPs 
emissions from electric utility generating units (EGUs).^^ The first EPA rule at 
issue, known as the "Delisting Rule," removed coal- and oil-fired EGUs from 
regulation under section 1 12 of CAA.^^ Instead of regulating the EGUs under 
section 112, the EPA sought to regulate these sources under section 1 1 1 of the 
CAA as the EPA believed it was no longer necessary and appropriate to regulate 
EGUs under the more stringent emission standards in section 112.^"^ Thus, the 
EPA promulgated the second rule at issue, which established new performance 
standards for EGUs and established total mercury emission limits for states and 
tribal governments, and a cap-and-trade program in which new and existing 
EGUs could voluntarily participate.^^ The second rule promulgated under CAA 

18. Sierra Club v.EPA,551F.3d 1019, 1027-28 (D.C.Cir. 2008) (citing 42 U.S.C.§ 7412(d) 

19. Clean Air Act § 1 12(g)(2), 42 U.S.C. § 7412(g)(2) (2006). 

20. Clean Air Act § 1 12(c)(9), 42 U.S.C. § 7412(c)(9) (2006). 

21. 517 F.3d 574 (D.C. Cir. 2008), cert, denied, 129 S. Ct. 1313 (2009). 

22. Id.2A511. 

23. Id. (citing Revision of December 2000 Regulatory Finding (De-listing Rule), 70 Fed. 
Reg. 15,994 (Mar. 29, 2005) (to be codified at 40 C.F.R. pt. 63)). 

24. Id. Section 112 requires that new sources adopt "the emission control that is achieved 
in practice by the best controlled similar source" with existing sources generally being required to 
"adopt emission controls equal to the 'average emission limitation achieved by the best performing 
12 percent of the existing sources.'" Id. at 578 (quoting Clean Air Act § 1 12(d)(3)(A), 42 U.S.C. 
§ 7412(d)(3)(A) (2006)). In contrast, section 111 standards limit emissions by "the degree of 
emission limitation achievable through the application of the best system of emission reduction 
which (taking into account the cost of achieving such reduction and any nonair quality health and 
environmental impact and energy requirements) the Administrator determines has been adequately 
demonstrated." /J. at580n.l. 

25. Id. at 577 (citing Clean Air Act § 1 1 1, 42 U.S.C. § 741 1 (2006)). The EPA originally 
determined in 2000 that it was appropriate and necessary to regulate coal- and oil-fired EGUs under 
section 112 because EGUs were the largest domestic source of mercury and mercury emissions 


section 111, was officially titled "Standards of Performance for New and 
Existing Stationary Sources: Electric Utility Steam Generating Units" and was 
generally referred to as the Clean Air Mercury Rule (CAMR).^^ The CAMR 
established: "[A] mechanism by which [mercury] emissions from new and 
existing [EGUs] are capped at specified, nation-wide levels. . . . [EGUs] must 
demonstrate compliance with the standard by holding one 'allowance' for each 
ounce of [mercury] emitted in any given year. Allowances are readily 
transferrable among all regulated [EGUs]."^^ 

The New Jersey petitioners claimed that the "Delisting Rule" violated the 
section 1 12(c)(9) requirements for delisting EGUs from regulation under section 
1 12.^^ Section 1 12(c)(9) provides that the EPA can only delist a source if the 
EPA determines that emissions from no source exceed a level adequate to protect 
public health with an ample margin of safety and that no adverse environmental 
effect will be caused by the emissions from that source.^^ The EPA conceded 
that it had not in fact complied with the requirements of section 112(c)(9) in 
delisting mercury HAPs by EGUs.^^ It argued instead that compliance was not 
required because the CAA's mandate to investigate whether to list EGUs should 
also be read to allow the EPA to subsequently determine that EGUs did not need 
to be listed without going through the specific delisting process outlined in 
section 112.^^ Furthermore, the EPA argued that it was an inherent principle of 
administrative law that an agency can reverse an earlier determination or ruling 
whenever an agency has a principled basis for doing so, as it claimed it had 
there. ^^ 

The court was not persuaded by the EPA's arguments, and accordingly 

present significant hazards to human health and to the environment. Id. at 579. The EPA 
reconsidered its regulatory approach to EGUs in 2004 and sought public comment as to whether 
EGU sources should stay under section 112 or be moved to section 111. /J. at 579-80. The EPA 
ultimately decided it had the authority to de-list EGUs from regulation after it made a subsequent 
"negative appropriate and necessary finding" under section 112, but did not go through the process 
of determining that no adverse environmental or health effects would result from the EGUs' 
mercury emissions. Id. at 580 (citing Delisting Rule, 70 Fed. Reg. 15,994, 16,032 (Mar. 15, 2005) 
(to be codified at 40 C.F.R. pt. 63)). The EPA also stated that its initial listing was not a final 
agency action, and it had the ability to reverse its prior decision. Id. The EPA's decision brought 
about the challenge in this court. Id. at 581. 

26. Standards of Performance for New and Existing Stationary Sources: Electric Utility 
Steam Generating Units, 70 Fed. Reg. 28,606 (May 18, 2005) (to be codified at 40 C.F.R. pts. 60, 
72, 75); see also New Jersey, 517 F.3d at 577. 

27. 70 Fed. Reg. at 28,606. 

28. New Jersey, 517 F.3d at 577-78, 581 (citing Clean Air Act § 112 (c)(9), 42 U.S.C. § 
7412(c)(9) (2006)). 

29. Id. di 581 (citing Clean Air Act § 1 12(c)(9), 42 U.S.C. 7412(c)(9) (2006)). 

30. Mat 582. 

31. Id. 

32. Id. (citing Williams Gas Processing-Gulf Coast Co. v. FERC, 475 F.3d 319, 326 (D.C. 
Cir. 2006); Dun & Bradstreet Corp. Found, v. USPS, 946 F.2d 189, 193 (2d Cir. 1991)). 

978 INDIANA LAW REVIEW [Vol. 42:973 

vacated both challenged EPA rules.^^ In so ruling, the court held that the removal 
of a listed source was governed by section 1 12(c)(9).^'^ As the EPA conceded 
that it had not followed the de-listing procedures in section 1 12(c)(9), the court 
looked at whether the EPA had the authority to de-list EGUs from section 112 
without complying with the specific delisting requirements set forth in that 
section.^^ The court held that the EPA did not have such authority.^^ The statute 
requiring the EPA to study whether EGUs should be listed does not mention 
delisting.^^ Further, the court determined that because Congress had specifically 
excluded EGUs from other statutory provisions, like the exemption of EGUs 
from strict deadlines under section 1 2(c)(6) imposed on other sources, but did not 
do so in section 112, Congress intended that delisting could only occur if the 
provisions of section 1 12(c)(9) were followed.^^ Since the EPA did not follow 
the proper procedures to delist mercury from section 112, the EPA's decision to 
regulate mercury emissions from EGUs under section 111 was unlawful.^^ The 
court therefore vacated both rules and remanded them to the EPA for further 
reconsideration. "^^ 

Unless the EPA is able to delist mercury emissions from EGUs under section 
112(c)(9), which, as discussed above, would be quite difficult because of the 
specific delisting procedures in section 112 that must be followed, the EPA will 
have to establish maximum achievable control technology (MACT) standards. "^^ 
Congress has considered legislation that would establish a deadline for EPA 
action."^^ In the meantime, applicants for permits to construct new EGUs or 
modify existing EGUs must seek from the EPA or the delegated state agencies, 
such as the Indiana Department of Environmental Management (IDEM), a case- 
by-case determination that the proposed units will meet MACT standards. "^^ 

C. Regulating Air Emissions Across State Lines: North Carolina v. EPA 

North Carolina v. EPA,^"^ brought by various plaintiffs across the country 
against the EPA challenging the agency's promulgation of the Clean Air 

33. Id. at 583-84. 

34. Id. at 583. 

35. Id. at 581 (citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 
842-43 (1984)). 

36. Id. at 582. 

37. Id. 

38. Id. 

39. Id. at 583. 

40. /J. at 583-84. 

41. Clean Air Act § 1 12(g)(2), 42 U.S.C. § 7412(g)(2) (2006). 

42. See, e.g.. Mercury Emissions Control Act, S. 2643, UOth Cong. (2008); Mercury 
Emissions Reduction Act, H.R. 1087, 1 10th Cong. (2007). 

43. Clean Air Act § 1 12(g)(2), 42 U.S.C. § 7412(g)(2) (2006). 

44. 531 F.3d 896 (D.C. Cir.), reh'g granted in part, 550 F.3d 1 176 (D.C. Cir. 2008). 


Interstate Rule (CAIR),"^^ attempted to regulate the emissions of the criteria 
pollutants sulfur dioxide (SO2) and nitrogen oxides (NOx)^^ under the CAA."^^ 
The purpose of CAIR was to reduce or eliminate the impact of upwind sources 
of pollutants that "contribute significantly" to out-of-state, downwind 
nonattainment of fine particulate matter (PM2 5) and ozone NAAQS."^^ The EPA 
determined that NO^ and SO2 were precursors to PM2 5 formation, and that NO^ 
was a precursor to ozone formation. "^^ As a result, under CAIR, the EPA required 
states that were upwind of areas of nonattainment for PM2 5 and/or ozone 
NAAQS to implement changes to SIPs to include control measures to reduce 
emissions of NO^ and SO2 if they "contribute significantly" to that state's 
nonattainment.^^ CAIR allowed states to reduce SO2 and NO^ emissions in 
phases and implement an interstate emission trading system for NO^ and S02.^^ 
At issue in North Carolina v. EPA was the ability of states to comply with 
the NAAQS set by the EPA for PM2 5 and ozone.^^ The plaintiffs challenged 
various aspects of CAIR. The primary plaintiff, the State of North Carolina, 
objected to the trading programs, the EPA's interpretation of the "interfere with 
maintenance" language in 42 U.S.C. § 7410(a)(2)(D)(i)(I), the 2015 compUance 
date for Phase Two of CAIR, the NO^ Compliance Supplement Pool, the EPA's 
interpretation of "will" in the phrase "will contribute significantly," and PM2 5's 
quality threshold.^^ Also, electric company plaintiffs challenged the EPA's 
authority "to limit the number of emission allowances in circulation, to set state 
SO2 budgets as a percentage reduction in Title IV allowances, and to require 
exempt from Title IV acquire Title IV allowances" for the cap and trade 
programs.^"^ Other challenges included whether the EPA had the "authority to 
base state NO^ budgets on the number of coal-, oil-, and gas-fired facilities a state 
has compared to other states in the CAIR region,"^^ as well as the start date for 
Phase I of the NO^ restrictions and whether certain states should have been 

45. Clean Air Interstate Rule, 70 Fed. Reg. 25,162, 25,165 (May 12, 2005) (codified at 
scattered sections of 40 C.F.R.). 

46. North Carolina, 531 F.3d at 901-03 (citing 42 U.S.C. §§ 7408(a)(1)(A), (B) (2006)). 

47. Clean Air Act §§ 401-16, 42 U.S.C. §§ 7651-7651o (2006). 

48. North Carolina, 531 F.3d at 903. 

49. Id. (citing Clean Air Interstate Rule, 70 Fed. Reg. 25,162 (May 12, 2005)). 

50. Id. at 903. States that "contribute significantly" to another state's non-attainment for 
ozone were subject to ozone season limits for NO^ and those that "contribute significantly" to non- 
attainment for PM2 5 were subject to annual limits for NO^ and SO2 under CAIR. Id. at 904. 

51. Id. at 903-05. A cap-and-trade system was already in place for NO^ and SOj. Id. at 902. 
NOx cap and trade was put in place in 1998 under the NO^ SIP Call, and SO2 cap and trade was part 
of Title IV of the Clean Air Act, which is commonly known as the Acid Rain Program. Id. CAIR 
revised the NO^ SIP Call and Acid Rain Program. Id. at 903. 

52. Mat 905. 

53. Id. 

54. Id. 

55. Id. 

980 INDIANA LAW REVIEW [Vol. 42:973 

excluded from CAIR.^^ 

1. North Carolina 's Challenges to CAIR. — The court reviewed three issues 
raised by North Carolina: (1) the CAIR's emission trading program,^^ (2) the 
EPA's interpretation of the '^interference with maintenance" language in 42 
U.S.C. § 7410(a)(2)(D)(i)(I),'^ and (3) the 2015 compliance deadline for Phase 
Two of CAIR.^^ First, with regard to CAIR's emission trading program, North 
Carolina did not contend that emission trading was per se unlawful, but argued 
instead that CAIR lacked reasonable measures to verify that upwind states were 
properly abating their emissions as required under the CAA.^^ Under CAIR, a 
state received an emission cap based upon, among other things, the types of 
sources located in that state.^^ Sources in each state were then allocated a certain 
emission allowance limit.^^ Sources in one state could then sell or purchase 
emission credits from sources in other states, which North Carolina argued could 
potentially result in a state emitting more emissions than allowed under its cap.^^ 

The court agreed with North Carolina and held that the emission trading 
system for SO2 and NO^ impermissibly failed to consider what an individual 
state' s contribution of pollutants to downwind non-attainment areas would be and 
whether the impact of these pollutant emissions contributed significantly to the 
non-attainment of another state with air standards. ^"^ In particular, the court 

CAIR must do more than achieve something measurable; it must actually 
require elimination of emissions from sources that contribute 
significantly and interfere with maintenance in downwind non 
attainment areas. To do so, it must measure each state's "significant 
contribution" to downwind nonattainment even if that measurement does 
not directly correlate with each state's individualized air quality impact 
on downwind nonattainment relative to other upwind states. ^^ 

Second, North Carolina argued that the EPA unlawfully ignored the 
"interfere with maintenance" language when developing the CAIR rule^^ as the 
EPA failed to afford protection to areas that, although currently in attainment, are 




Id. at 906-09 


Mat 909- 11 


/J. at 91 1-12 


Id. at 907. 


Id. at 904. 


Id. at 907. 





65. Id. at 908 (citing Michigan v. EPA, 213 F.3d 663, 679 (D.C. Cir. 2000)). 

66. Id. at 908-09. The Clean Air Act requires the "EPA to ensure that SIPs 'contain adequate 
provisions'" that prohibit sources in a State from emitting air pollutants in an amount which will 
contribute significantly to non-attainment in "or interfere with maintenance by, any other State with 
respect to any [NAAQS]." Id. at 908 (quoting 42 U.S.C. § 7410(a)(2)(D)(i)(I) (2006)). 


at risk for becoming in nonattainment due to interference from upwind sources,^^ 
The EPA disagreed and argued that "interfere with maintenance" was an issue 
only when the EPA or a state could "reasonably determine or project, based on 
available data, that an area in a downwind state [would] achieve attainment, but 
due to emissions growth or other relevant factors is likely to fall back into 

The court again agreed with North Carolina because the EPA' s interpretation 
essentially gave no meaning to the phrase "interfere with maintenance" as a 
means of separately identifying possible upwind sources that could affect 
downwind attainment status.^^ The EPA's interpretation therefore violated the 
CAA's plain language requiring a SIP to prevent any source "from emitting any 
air pollutant in amounts which will contribute significantly to nonattainment in, 
or interfere with maintenance by, any other state. "^° Consequently, the court 
held that the EPA was required to determine what level of emissions constitutes 
an upwind state's "significant contribution" to a downwind non-attainment area 
as well as the potential for an upwind source to interfere with the maintenance 
of a downwind state's attainment status.^^ 

Lastly, North Carolina argued that the compliance deadline set forth in CAIR 
for upwind sources was generally inconsistent with the compliance deadlines set 
forth in the NAAQS, as CAIR gave upwind sources five more years to comply 
with PM2 5 and ozone NAAQS than that required by North Carolina. ^^ The EPA 
tried to justify its actions by arguing that the CAA did not require the EPA to 
have the same CAIR compliance timeframes as those found for NAAQS. ^^ The 
court disagreed and found that the EPA did not make any effort to "harmonize" 
the deadlines for upwind sources to eliminate their contribution with the 
attainment deadlines for downwind areas, forcing downwind areas to make 
greater reductions than required by the CAA.^"^ 

2. Electric Company Challenges to CAIR: Emission Allowances and 
Budgets. — The electric utilities challenged CAIR's allocation of the SO2 and 
NOx emission budgets, arguing that the EPA never explained how the budgets 
it set for the states related to the prohibition of significant contribution of 
emissions to downwind non-attainment.^^ The EPA argued that it had properly 
set the state SO2 emission budget limits based on the amount of emissions that 
sources using "highly cost-effective" controls, and any allowances provided 

67. Id. at 909. 

68. Id. (citing Clean Air Interstate Rule, 70 Fed. Reg. 25,162, 25,193 n.45 (May 12, 2005) 
(codified in scattered sections of 40 C.F.R.)). 

69. /^. at 909-10. 

70. Id. (quoting 42 U.S.C. § 7410(a)(2)(D)(i)(I) (2006)). 

71. /^. at 910-11. 

72. Mat 911. 

73. Id. 

74. Mat 912. 

75. Mat 916. 

982 INDIANA LAW REVIEW [Vol. 42:973 

under Title IV of the CAA, could eliminate.^^ The EPA also argued that it 
properly allocated NO^ budgets based on a "fuel factor" analysis, considering the 
type of fuel used for various sources within a state, such as power plants, in order 
to achieve what it considered a more equitable distribution of allowances to 
account for the variable costs of sources to comply 7^ 

The court disagreed with the EPA, noting the allowances set under Title IV 
were not designed to address the non-attainment of PM2 5.^^ As such, the EPA's 
failure to explain how the allowances in Title IV would achieve the goals of 
reducing significant contribution to downwind sources, as well as how it arrived 
at the reduction figures for future levels of the PM2 5 precursors,^^ rendered its 
SO2 budget allowance arbitrary and capricious. ^^ Similarly, with regard to NO^ 
budgets, the court found the EPA's adjustment to the amount and type of fuel 
used for sources was arbitrary and capricious, as it failed to correlate with how 
that adjustment would reduce a state's contribution to downwind non- 
attainment.^' Furthermore, the court held that the EPA's approach of allocating 
allowances based on fuel type would potentially result in states subsidizing the 
emission controls of other states, which violates the requirement of the CAA that 
each state be responsible for eliminating its own significant contribution to 
downwind pollution.^^ 

3. State Challenges to CAIR. — Three states challenged their inclusion in 
CAIR: Texas, Florida, and Minnesota.^^ Texas argued that the EPA should 
consider the emissions from West Texas separately from the rest of the state 
based on the state's size, location, and other factors.^'' The EPA disagreed, in 
part because of a fear of creating ''in-state pollution havens. "^^ The court held 
that there was no duty for the EPA to divide Texas into separate areas.^^ Florida 
argued that the screening method used by the EPA to determine whether Florida 
should be included in CAIR was improper. ^^ The court disagreed, finding that 
the EPA treated Florida like every other state and that the data supported 

76. Mat 916-17. 

77. /J. at 918. 

78. Mat 917. 

79. Id. 

80. Id. at 918. 

81. Id. at 919. The court acknowledged that the EPA's attempt to permit more allowances 
in areas with coal-fired power plants was meant to help ease the economic burden of those sources 
to meet emission limits; however, the court held it unfairly resulted in a penalty to states with oil- 
burned power plants, as coal-fired EGUs could obtain additional credits if needed from the emission 
trading market. Mat 919-20. 

82. Id. at 92 1 . The court also found that there was nothing in the Clean Air Act that would 
allow the EPA to remove Title IV emission allowances from the Title IV market. Id. at 922. 

83. Id. at 905. 

84. M. at 923. 

85. M. at 924. 

86. Id. 

87. Id. 


including Florida in CAIR for ozone and PMj 5.^^ Finally, Minnesota argued that 
it should not have been included in CAIR, because the EPA never properly 
calculated its emission contribution potential because when it performed several 
analyses of the emissions from Minnesota, the EPA came up with a different 
contribution number each time and these numbers were borderline to the baseline 
standard the EPA had set for inclusion in CAIR.^^ The court agreed with the 
state, finding that the inclusion of Minnesota in CAIR was "a borderline call," 
that the actual downwind contribution was still uncertain, and that the EPA 
needed to respond to Minnesota's calculation concems.^^ 

Although various remedies were presented to remedy CAIR' s alleged 
deficiencies, the court ultimately found CAIR so fundamentally flawed that the 
court could not choose which portions of CAIR should be saved; therefore, the 
entire CAIR rule had to be vacated.^ ^ On rehearing, in an opinion outside the 
survey period, the court stayed its vacatur of CAIR until the EPA promulgated 
a revised rule consistent with the court's prior ruling, but noted that such a stay 
was not indefinite.^^ Nonetheless, the EPA must re-analyze the emission cap, 
reconsider which states should be included in CAIR, determine what the 
compliance date will be, and re-write the cap and trade program, which 
essentially requires a complete overhaul of the rule as originally written.^^ 

D. Challenges to State Authority to Supplement Title V Permit Requirements 

The EPA faced yet another challenge to its rulemaking authority in Sierra 
Club V. EPA,^^ which involved a challenge to an EPA rule that prevented state 
and local authorities from adding additional monitoring requirements to air 
permits issued under Title V of the CAA.^^ Title V of the CAA established a 
national permit regime for issuing permits to stationary sources of air pollution 
that included emission limits and monitoring requirements, and gave the EPA the 
authority to identify the minimum elements of the permit program, to establish 
compliance procedures, and to object to permits it deems not to comply with the 
CAA.^^ The EPA can delegate responsibility of issuing the Title V permits to the 
state and local authorities.^^ At issue in Sierra Club was whether the monitoring 

88. Mat 925-26. 

89. /J. at 926-27. 

90. Mat 928. 

91. Mat 929. 

92. North Carolina v. EPA, 550 F.3d 1 176, 1 177-78 (D.C. Cir. 2008). 

93. North Carolina, 531 F.3d at 929-30. 

94. 536 F.3d 673 (D.C. Cir. 2008). 

95. Id. at 674. 

96. Id. (citing 42 U.S.C. § 7661 (2006)). 

97. Id. A first notice for a CAIR replacement rule was published in the Indiana Register in 
October 2008. Development of New Rules Concerning Nitrogen Oxide and Sulfur Dioxide 
Emissions from Fossil Fuel-Fired Power Plants, Ind. Legis. Servs. Agency Doc. 08-817 (proposed 
Oct. 22, 2008), available at 

984 INDIANA LAW REVIEW [Vol. 42:973 

requirements in Title V permits were sufficient to assure compliance with permit 
terms and conditions required by the CAA, and whether it was the EPA or the 
permitting authority's (i.e. the state's) responsibility to make sure the monitoring 
requirements were in fact sufficient to assure compliance. ^^ 

In 1990, the EPA set forth the rules establishing the minimum requirements 
for administering the Title V program,^^ which required that a Title V permit 
identify "[a] 11 monitoring . . . required under applicable monitoring and testing 
requirements," but if an applicable requirement did not contain periodic testing, 
then the Title V permit must include "periodic monitoring sufficient to yield 
reliable data from the relevant time period that are representative of the source's 
compliance with the permit." ^^^ The rule also provided that all permits contain 
monitoring requirements sufficient to assure compliance with the terms and 
conditions of the Title V permit to address concerns that periodic emissions 
monitoring would not be sufficient to ensure compliance with permit 
requirements. ^^^ In its 2006 rule, the EPA determined that only it could set 
monitoring requirements and that state and local authorities did not have the 
power to insert a monitoring requirement into a source's Title V permit. ^^^ 

In evaluating the EPA's rule, the court looked at the EPA's historical 
treatment of this issue, which showed that the EPA had at one time allowed state 
and local permitting authorities to supplement periodic monitoring requirements 
to assure compliance. *°^ In determining that the EPA's 2006 rule violated the 
CAA, the court examined the language of the EPA rule and found that the EPA' s 
monitoring requirement was insufficient "to assure compliance" with emission 
limits and needed to be supplemented with a more rigorous standard. ^^"^ The 
court also noted that the EPA could have fixed the inadequate monitoring in one 
of two ways: (1) through a rulemaking process before any permits were issued 
under Title V, which it did not do; or (2) by "[authorizing] permitting authorities 
to supplement inadequate monitoring requirements on a case-by-case basis. "^^^ 
Yet, because the EPA had previously chosen to allow permitting authorities to 
supplement monitoring requirements before the promulgation of the challenged 
2006 rule, instead of implementing its own rules to fix the inadequate 
monitoring, if state and local authorities did not continue to supplement 
monitoring requirements there would be permits that did not fully comply with 
Title V.^^^ The court held this violated the CAA requirement that each permit 
issued under Title V have adequate monitoring requirements to assure 

xml.html (last visited Aug. 1, 2009). 

98. Sierra Club, 536 F.3d at 675 (citing 42 U.S.C. § 7661c(c) (2006)). 

99. See Clean Air Act § 504, 42 U.S.C. § 7661a(b) (2006). 

100. Sierra Club, 536 F.3d at 675 (citing 40 C.F.R. §§ 70.6(a)(3)(i)(A) & (B) (2008)). 

101. Id. (citing 40 C.F.R. § 70.6(c)(1)). 

102. Id. at 676. 

103. Id. 

104. Id. at 677 (citing 40 C.F.R. § 70.6(c)(1)). 

105. Id. 

106. Id. 


compliance. ^°^ The court acknowledged that the EPA could have solved the 
problem by fixing the inadequate monitoring requirements prior to the issuance 
of any Title V permit, but failed to do so, and therefore the state and local 
authorities must be allowed to fix the monitoring inadequacies before the permits 
could be issued. ^^^ Therefore, Sierra Club allows a permitting authority to 
supplement an inadequate monitoring requirement and therefore comply with the 

E. In the Wings: Decisions to Examine Going Forward 

As a preview for next year's survey article, we note that the court in United 
States V. Cinergy Corp.,^^^ issued an opinion outside the survey period that 
significantly expanded the scope, and type, of relief available to the government 
for permit requirements violations under the New Source Review program.^ ^^ 
Similarly, Sierra Club v. EPA (Sierra 11),^^^ pending before the District of 
Columbia Circuit Court of Appeals during the survey period, addressed a 
challenge to an EPA rule exempting major sources of HAPs from normal 
emission standards during periods of startups, shutdowns, and malfunctions 
(SSM), and instead imposed less burdensome alternative requirements in the 
place of the normal emission standards. ^ ^^ Finally, standing and permit violations 
under the PSD program were addressed in Sierra Club v. Franklin County Power 
of Illinois, LLC}^^ 

n. Changing Rules for Obtaining Costs for Environmental 

Contamination: Indiana Courts Address Key Statute 

OF Limitations Issues for State Law Actions 

The Indiana Supreme Court recently clarified Indiana law with regard to the 
accrual of two key types of claims for environmental damages: ^^^ (1) claims 

107. Id. 

108. /J. at 678-79. 

109. Id. at 680. 

110. 582 F. Supp. 2d. 1055 (S.D. Ind. 2008). 

111. Mat 1066. 

112. 551 F.3d 1019 (D.C. Cir. 2008). 

113. Id. at 1028. In an opinion issued after the survey period, the D.C. Circuit Court vacated 
the EPA's rule, holding that SSM exemption violated the Clean Air Act § 1 12 requirement that 
certain emission standards apply continuously. Id. at 1027-28. 

1 14. 546 F.3d 918, 922 (7th Cir. 2008), cert, denied, 129 S. Ct. 2866 (2009). 

115. Under Indiana's discovery rule, a cause of action accrues, and the statute of limitation 
begins to run, when a claimant knows, or in exercise of ordinary diligence should have known, of 
the injury. Wehling v. Citizens NatT Bank, 586 N.E.2d 840, 842-43 (Ind. 1992). The discovery 
rule is based on the reasoning that it is inconsistent with our system of jurisprudence to require a 
claimant to bring her cause of action during a limited period in which, even with due diligence, she 
could not be aware that a cause of action exists. New Welton Homes v. Eckmant, 830 N.E.2d 32, 
37 (Ind. 2005) (Rucker, J., dissenting) (citing Baines v. A.H. Robins Co., 476 N.E.2d 84, 86 (Ind. 

986 INDIANA LAW REVIEW [Vol. 42:973 

brought pursuant to the Indiana Underground Storage Tank Act (USTA);^^^ and 
(2) claims for "stigma damages" — damages resulting from the stigma of 
environmental contamination.*^^ Furthermore, the court is set to address statute 
of limitations issues associated with the Environmental Legal Action statute 
(ELA), as well as common law tort claims for environmental costs. 

A. Pflanz V. Foster.- Underground Storage Tank Act and Stigma Damages 

On June 1 9, 2008, the Indiana Supreme Court ruled in Pflanz v. Foster^^^ that 
the statute of limitations for a cost recovery action under the USTA is ten 
years,* *^ which did not begin to run until after a party was ordered to clean up the 
property "regardless of whether an owner earlier knew or should have known 
about the need for cleanup." *^^ The court also ruled that a claim for 
environmental stigma damages was subject to a six-year statute of limitations that 
only accrued after remediation had been substantially completed.*^* As such, 
Pflanz arguably gave a significant victory to entities seeking to recover clean-up 

Under the USTA, an owner or operator of an underground storage tank 
(UST) is generally liable to the State of Indiana "for the actual costs of any 
corrective action taken . . . involving [a UST]."*^^ Such owners and operators are 
also "responsible for undertaking any corrective action, including undertaking an 
exposure assessment, ordered ... or required" by the State. *^^ In addition, any 
person who pays the State of Indiana to take corrective action regarding a UST, 
or who undertakes such corrective action on his own, is entitled to contribution 
from the person who owned or operated the tank when the release occurred. ^^"^ 
The USTA applies to contamination that occurred prior to the enactment of the 
statute, as well as releases occurring after the statute's enactment. *^^ 


116. IND. Code § 13-23-13-8 (2004). 

1 17. Terra-Products, Inc. v. Kraft Gen. Foods, Inc., 653 N.E.2d 89, 95 (Ind. Ct. App. 1995). 

118. 888 N.E.2d 756 (Ind. 2008). 

119. /J. at 758. Contributions claims under the USTA had been previously recognized as 
having a ten-year statute of limitations. Comm'r, Ind. Dep't of Envtl. Mgmt. v. Bourbon Mini- 
Mart, Inc., 741 N.E.2d 361, 371-72 (Ind. Ct. App. 2000), ajf'd in relevant part by 783 N.E.2d 253, 
257 (Ind. 2003). 

120. P/?«nz, 888 N.E.2d at 757. 

121. Mat 758-60. 

122. Ind. Code § 13-23-13-8(a) (2004). Indiana's USTA statute exempts owners and 
operators that "can prove that a release from an underground storage tank was caused solely by: 
(1) an act of God; (2) an act of war; (3) negligence on the part of the state or the United States 
government; or (4) any combination of the causes set forth in subdivisions (1) through (3)," from 
liability. Id. 

123. Id. 

124. Id. § 13-23-13-8(b). 

125. Bourbon Mini-Mart, Inc. v. Gast Fuel & Servs., Inc., 783 N.E.2d 253, 261 (Ind. 2003). 


Indiana law permits recovery of stigma damages for losses in the fair market 
value of property after remediation of environmental contamination. ^^^ Stigma 
damages are warranted where the claimant can demonstrate that an imperfect 
market rendered her property less valuable despite complete restoration.*^^ 

In Pflanz, the plaintiffs purchased a former gas station from the defendant 
Foster in 1984.*^^ The Pflanzes alleged that before the sale, Foster informed 
them that there were underground storage tanks on the property but the tanks 
were not in use and had been properly emptied and sealed. *^^ In 2001, the 
Pflanzes learned that the tanks were leaking fuel, and were ordered by IDEM to 
clean up the property. *^° Three years later, and twenty years after purchasing the 
property, the Pflanzes filed suit against Foster seeking the costs of the clean-up 
for the leaking tanks under the USTA and property damage for the stigma of 
environmental contamination.*^* The parties agreed that the general ten-year 
statute of limitations applied to the Pflanzes' USTA contribution claim; however, 
they disagreed on when the statute of limitations began to run.*^^ 

Foster moved to dismiss the Pflanzes' claims on statute of limitations 
grounds, arguing that the Pflanzes' claims began to run when the USTA was first 
enacted. *^^ After the trial court dismissed the Pflanzes' claims, the Indiana Court 
of Appeals affirmed the dismissal. ^^'^ The Indiana Court of Appeals concluded 
that ''the Pflanzes, in the exercise of reasonable diligence, should have tested the 
property for contamination" when Indiana enacted and amended the USTA's 
contribution statute in 1987 and 1991.*^^ Furthermore, the court found that the 
Pflanzes' claims had to be filed no later than 1997, which was six years after the 
enactment of certain amendments to the USTA.*^^ 

The Indiana Supreme Court reversed, holding that the ten year statute of 
limitations for a cost recovery action under the USTA did not begin to run "until 

126. Terra-Products, Inc. v. Kraft Gen. Foods, Inc., 653 N.E.2d 89, 95 (Ind. Ct. App. 1995). 

127. Id. at 93. Terra-Products, Inc., was a PCB contamination case in which the Indiana 
Court of Appeals recognized the right to recover damages for a loss in the fair market value of 
property due to stigma if the party could demonstrate that an imperfect market rendered its property 
less valuable despite complete restoration. Id. (citing In re Paoli R.R. Yard PCB Litig., 35 F.3d 
717, 797 (3d Cir. 1994)). The court applied a three-element test for a stigma damages claims: "(1) 
defendants have caused some (temporary) physical damage to plaintiffs' property; (2) plaintiffs 
demonstrate that repair of this damage will not restore the value of the property to its prior level; 
and (3) plaintiffs show that there is some ongoing risk to their land." Id. (citing In re Paoli, 35 F.3d 
at 797-98). 

128. Pflanz v. Foster, 888 N.E.2d 756, 758 (Ind. 2008). 

129. Id. 















988 INDIANA LAW REVIEW [Vol. 42:973 

after the Pflanzes were ordered to clean up the property." ^^^ In this regard, the 
court noted that 

in contribution or indemnification cases, the damage that occurs is the 
incurrence of a monetary obligation that is attributable to the actions of 
another party. That is why, generally, parties bringing contribution and 
indemnification claims must wait until after the obligation to pay is 
incurred, for otherwise the claim would lack the essential damage 
element. *^^ 

Therefore, the court held that because IDEM's order regarding the Pflanz 
property was issued in 2001, the Pflanzes' lawsuit was well within the ten-year 
statute of limitation, and that passage of the USTA did not, as a matter of law, 
automatically put landowners on notice that they should inspect and monitor their 
property for underground storage tanks. ^^^ In addition, the court officially 
recognized claims for stigma damages and noted that they were subject to a six- 
year statute of limitations that could not "ripen until remediation has been 
substantially completed because only then can the impact of the former 
environmental contamination on property value be determined." ^"^^ 

B. Indiana Supreme Court to Review Statute of Limitations for Environmental 

Legal Action and State Tort Claims 

On November 20, 2007, the Indiana Supreme Court granted transfer in 
Cooper Industries, LLC v. City of South Bend,^^^ to address the applicable statute 
of limitation for environmental contamination claims alleging common law 
trespass and nuisance as well as claims brought under the Environmental Legal 
Action statute (ELA).^"^^ The Indiana Supreme Court issued its opinion in 
Cooper, outside the survey period, but before the publication of this Article. A 
full analysis of the court's opinion will be provided in the next survey article. In 
short, the court reversed the decision of the Indiana Court of Appeals, in part, 
holding that the City of South Bend' s claims for property damage claims brought 
under the ELA were timely as South Bend did not have a complete cause of 
action until the ELA became effective and that the statute of limitations did not 
begin to accrue until that date.^"^^ 

137. Id. at 159. 

138. Id. (citing Comm'r, Ind. Dep't of Envtl. Mgmt. v. Bourbon Mini-Mart, Inc., 741 N.E.2d 
361, 372 n.9 (Ind. Ct. App. 2000), qff'd in relevant part by 783 N.E.2d 253, 257 (Ind. 2003)). 

139. Mat 759-60. 

140. Id. at 760 (citing Allgoodv. Gen. Motors Corp., No. 102-CV-1077-DFH-TAB,2006 WL 
2669337, at *36 (S.D. Ind. Sept. 18, 2006)); see also iND. CODE § 34-1 1-2-7 (2008). 

141. 863 N.E.2d 1253 (Ind. Ct. App.), trans, granted, 878 N.E.2d 219 (Ind. 2007), vacated, 
899 N.E.2d 1274 (Ind. 2009). 

142. Id.', see also iND. CODE § 13-30-9-2 (2008). 

143. Cooper Indus, v. City of S. Bend, 899 N.E.2d 1274, 1279, 1285-86 (Ind. 2009). 


in. Developments in Federal Regulation of RCRA and CERCLA 

In 1976, the Resource Conservation and Recovery Act (RCRA)^"^ was 
enacted to regulate ongoing hazardous waste disposal and handling. ^"^^ Four 
years later Congress enacted the Comprehensive Environmental Response, 
Compensation, and Liability Act (CERCLA) ^"^^ to shore up a perceived gap in the 
protection provided under RCRA for inactive, abandoned hazardous waste 
sites^"^^ and to "provide for liability, compensation, cleanup, and emergency 
response for hazardous substances released into the environment and the cleanup 
of inactive hazardous waste disposal sites." ^"^^ The CERCLA regulates 
enumerated "hazardous wastes," but specifically excludes petroleum wastes from 
its ambit. ^"^^ 

Under CERCLA, the Federal Government may clean up a contaminated area 
itself or may compel responsible parties to perform the cleanup. ^^^ In either case, 
the Government may recover its response costs under CERCLA section 107, 42 
U.S.C. § 9607, the "cost recovery" section of CERCLA.^^^ Section 107(a) lists 
four classes of potentially responsible persons (PRPs)^^^ and provides that they 

144. 42 U.S.C. § 6972 (2006). 

145. Id. 

146. 42 U.S.C. §§9601-9675(2006). 

147. See generally Metro. Water Reclamation Dist. v. N. Am. Galvanizing & Coatings, Inc., 
473 F.3d 824, 826-27 (7th Cir. 2007), reh'g denied', Wilshire Westwood Assoc, v. Atl. Richfield, 
881 F.2d 801, 805-08 (9th Cir. 1989); Commercial Logistics Corp. v. ACF Indus., Inc., 2006 U.S. 
Dist. LEXIS 84338, at *10-1 1 (S.D. Ind. July 18, 2006), vacated on other grounds, 316 F. App'x 
499 (7th Cir. 2009). 

148. H.R.7020, 96th Cong., 2d Sess. ( 1 980). The Seventh Circuit has explained that CERCLA 
was enacted for two reasons: ( 1 ) to "establish a comprehensive response and financing mechanism 
to abate and control the vast problems associated with abandoned and inactive hazardous waste 
disposal sites"; and (2) "to shift the costs of cleanup to the parties responsible for the 
contamination." Metro. Water Reclamation Dist., 473 F.3d at 827 (quoting H.R. Rep. 96-1016, at 
1 (1980), reprinted in 1980 U.S.C.C.A.N. 6119, 6125). 

149. 42 U.S.C. § 9601(14) (2006); see generally Pantry, Inc. v. Stop-N-Go Foods, Inc., 777 
F. Supp. 713, 720 (S.D. Ind. 1991), modified, 796 F. Supp. 1164 (S.D. Ind. 1992). 

150. See 42 U.S.C. §§ 9604, 9606(a) (2006); see also Key Tronic Corp. v. United States, 5 1 1 
U.S. 809, 814 (1994). CERCLA allows the EPA the option to commence cleanup of a particular 
property or site on its own using monies from the Hazardous Substances Superfund. 42 U.S.C. § 
9604(c)(1) (2006). The Hazardous Substances Superfund is a fund established by CERLCA and 
financed through a combination of appropriations, EPA fees, and industry taxes. 26 U.S.C. § 
9507(b) (2006); United States v. Hercules, Inc., 247 F.3d 706, 715 (8th Cir. 2001). 

151. Comprehensive Environmental Response, Compensation, and Liability Act § 107, 42 
U.S.C. § 9607 (2006). 

152. Comprehensive Environmental Response, Compensation, and Liability Act § 107(a), 42 
U.S.C. § 9607(a) (2006) divides potentially responsible parties into the following four categories: 

(1) the owner and operator of a vessel or a facility, 

(2) any person who at the time of disposal of any hazardous substance owned or 

990 INDIANA LAW REVIEW [Vol. 42:973 

"shall be liable" for, among other things, "all costs of removal or remedial action 
incurred by the United States Government . . . not inconsistent with the national 
contingency plan."^^^ 

Section 107(a) further provides that PRPs shall be liable for "any other 
necessary costs of response incurred by any other person consistent with the 
national contingency plan."^^"^ For PRPs, liability under section 107(a) has 
generally be held to be strict, joint, and several. ^^^ In 1986, Congress amended 
CERCLA to include the Superfund Amendments and Reauthorization Act 
(SARA),^^^ which added an express right of contribution to CERCLA that 
provides, "[a]ny person may seek contribution from any other person who is 
liable or potentially liable under section 9607(a) of this title, during or following 
any civil action under section 9606 of this title or under section 9607(a) of this 
title."^^^ In addition, SARA at section 113(f)(3)(B) provides, 

[a] person who has resolved its liability to the United States or a State 
for some or all of a response action or for some or all of the costs of such 
action in an administrative or judicially approved settlement may seek 
contribution from any person who is not party to a settlement. ^^^ 

operated any facility at which such hazardous substances were disposed of, 

(3) any person who by contract, agreement, or otherwise arranged for disposal or 
treatment, or arranged with a transporter for transport for disposal or treatment, of 
hazardous substances owned or possessed by such person, by any other party or entity, 
at any facility or incineration vessel owned or operated by another party or entity and 
containing such hazardous substances, and 

(4) any person who accepts or accepted any hazardous substances for transport to 
disposal or treatment facilities, incineration vessels or sites selected by such person, 
from which there is a release, or a threatened release which causes the incurrence of 
response costs, of a hazardous substance. 

153. 42 U.S.C. § 9607(a)(4)(A) (2006). The national contingency plan specifies procedures 
for preparing and responding to contaminations and was promulgated by the EPA pursuant to 
CERCLA § 105 or 42 U.S.C. § 9605 (2006). The plan is codified at 40 C.F.R. §§ 300. 1 to . 1 105 

154. 42 U.S.C. § 9607(a)(4)(B) (2006). 

155. Metro. Water Reclamation Dist. v. N. Am. Galvanizing & Coatings, 473 F.3d 824, 827 
(7th Cir. 2007), reh'g denied. 

156. See Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499, 100 
Stat. 1613 (1986). 

157. 42 U.S.C. § 9613(f)(1) (2006). 

158. Id. § 9613(f)(3)(B). Before the enactment of SARA, courts had held that section 
107(a)(4)(B) allowed certain PRPs that voluntarily incurred response costs and were not subject 
to suit to recover costs from other PRPs. See, e.g., Wickland Oil Terminals v. Asarco, Inc., 792 
F.2d 887, 890-92 (9th Cir. 1986); Walls v. Waste Res. Corp., 761 F.2d 311, 3 17-18 (6th Cir. 1985). 
Courts also held that even though CERCLA did not provide expressly for a right of contribution, 
a PRP who was to commence cleanup or repay response costs under section 107(a) had an implied 
right to obtain contribution from other responsible parties. See, e.g.. United States v. New Castle 


In Cooper Industries v. Aviall Services, Inc.,^^^ the U.S. Supreme Court held that 
a private party could seek contribution under section 1 13(f)(1) only after being 
sued under section 106 or section 107(a). ^^^ However, the Court later held in 
United States v. Atlantic Research Corp}^^ that PRPs could pursue a cause of 
action to recover costs from other PRPs under section 1 07(a). ^^^ 

The Supreme Court's opinion in Atlantic Research clarified that there are 
two distinct causes of action under CERCLA. The first is a cause of action for 
cost recovery, which may be brought under CERCLA section 107 by a party that 
has incurred costs in cleaning up a contaminated site. The second is a cause of 
action for contribution, which may be pursued under CERCLA section 1 13 by 
a defendant in a CERCLA lawsuit or by a person at least partially responsible for 
contaminating the site.^^^ These actions are brought pursuant to CERCLA 
sections 107(a), 113(f)(1), or 113(f)(3).^'^ 

A. Possible New Restrictions on Rights to Contribution Under 

CERCLA Section 113 

The decision of the United States District Court for the Northern District of 
Indiana in City of Gary v. Shafer^^^ has added heightened scrutiny to whether 
PRPs can obtain costs under CERCLA section 1 13(f)(3) following entry into a 
remediation agreement with the State of Indiana. In Shafer, the City of Gary 
obtained contaminated property as part of a settlement with a company for 
delinquent taxes, and filed suit against former owners of the property to recover 

County, 642 F. Supp. 1258, 1263-69 (D. Del. 1986) (contribution right arises under federal 
common law); Wehner v. Syntex Agribusiness, Inc., 616 F. Supp. 27, 31 (E.D. Mo. 1985) (finding 
that contribution right is implied fi^om section 107(e)(2)). 

159. 543 U.S. 157 (2004). 

160. Id. at 161. 

161. 551 U.S. 128(2007). 

162. Mat 141. 

163. Id. at 138-39; Appleton Papers Inc. v. George A. Whiting Paper Co., 572 F. Supp. 2d 
1034, 1041 (E.D. Wis. 2008). It should be noted that CERCLA provides either a three- or a six- 
year statute of limitation, depending on the type of action and the nature of the cleanup activities 
performed at the site. See Northstar Partners v. S&S Consultants, Inc., 2004 U.S. Dist. LEXIS 
7799, at *8-9 (S.D. Ind. Mar. 31, 2004) (interpreting 42 U.S.C. §§ 9607(a), 9613(f)(1) (2006)). 

164. Ad. Research Corp., 55\ U.S. at 138-39. A f/<3m/c/?^5^«rc/i further held that when a PRP 
pays a judgment or discharges its obligation under a settlement agreement, recovery of those costs 
must be pursued under section 1 13(f), rather than section 107. Id. CERCLA section 1 13(f)(3)(B) 
permits a PRP to seek contribution after it "has resolved its liability to the United States or a State 
in an administrative or judicially approved settlement." Id. at 139 n.5 (citing 42 U.S.C. § 
9613(f)(3)(B) (2006)). Moreover, a PRP's right to contribution under section 113(f)(1) is 
contingent upon an inequitable distribution of common liability among liable parties. Id. at 139; 
see also Appleton Papers Inc. , 572 F. Supp. 2d at 1 04 1 (holding contribution claim was appropriate 
to recover excess payments made by the two PRPs from other PRPs). 

165. No. 2:07-CV-56-PRC, 2007 U.S. Dist. LEXIS 75503 (N.D. Ind. Oct. 4, 2007). 

992 INDIANA LAW REVIEW [Vol. 42:973 

remediation costs pursuant to CERCLA sections 107 and 113.'^^ The defendants 
moved to dismiss Gary's claims under section 113(f) on the ground that Gary 
could not maintain a section 113 claim. '^^ Gary argued that it could bring a 
contribution claim against the defendants pursuant to section 113(f)(3)(B) 
because it had "resolved any potential liability to the state and federal 
government with regard to the Property through a Voluntary Remediation 
Agreement [(VRA)]" reached with the State of Indiana via IDEM.^^^ 

The Shafer court disagreed and dismissed the City's CERCLA section 113 
claim, because the VRA did not resolve all of Gary's CERCLA liability. ^^^ In 
reaching this conclusion, the court noted that Section 1 13(f)(3)(B) is concerned 
with potential CERCLA liability resolution with the state and federal 
government. ^^^ Consequently, because "section 113(f)(3)(B) [creates] a 
contribution right only when liability for CERCLA claims, rather than some 
broader category of legal claims is resolved," an agreement with a State that 
leaves open any possibility of CERCLA liability prohibits a party from obtaining 
contribution under section 1 13(f)(3)(B). ^^^ The court went on to note that Gary's 
settlement agreement with the State of Indiana contained two provisions that left 
Gary's CERCLA liability unresolved: 

First, the Compliance with Applicable Laws section of the VRA, 
paragraph 28 provides: 

Nothing in this Agreement, the Certificate of Completion, or the 
Covenant Not to Sue shall be construed to relieve the [City of 
Gary] of any natural resource damage liability arising from 
contaminants, even if addressed by the Remediation Work Plan, 
including under the following authorities: 42 U.S.C. § 9601 . . 
. (CERCLA). 

Second, the Reservation of Rights section of the VRA, paragraph fifty- 
nine provides: 

IDEM reserves the right to bring an action, including an 
administrative action, against [the City of Gary] for any 
violations of statutes or regulations except for the specific 
violations or releases that are being remediated in the 
Remediation Work Plan.^^^ 

166. Id.atH-7. 

167. /J. at*18. 

168. Mat*18-19. 

169. /fif. at *24-25. 

1 70. Id. at * 1 9-20 (quoting City of Waukesha v. Viacom Int' 1 Inc. , 404 F. Supp. 2d 1 1 1 2, 1 1 1 5 
(E.D. Wis. 2005)). 

171. Id. (quoting City of Waukesha., 404 F. Supp. 2d at 1 1 15)). 

172. /6f. at*21. 


The court found that these paragraphs failed to relieve Gary of all CERCLA 
liability for environmental damage for the properties at issue. '^^ Furthermore, the 
court stated that Indiana's Memorandum of Agreement with the EPA did not 
help, because Gary did not have a Certificate of Completion showing remediation 
was complete and the Memorandum of Agreement allowed the EPA to bring an 
action under CERCLA if the "site poses an imminent and substantial threat to 
human health or the environment."^ '''^ Whether the property was an exceptional 
circumstance that would warrant CERCLA prosecution by the EPA was a 
question not before the court. ^^^ 

As such, under Shafer, settlement with the State of Indiana will no longer 
automatically be sufficient to show that CERCLA liability for natural resource 
or other damages has been resolved allowing a party to obtain contribution costs 
under CERCLA section 113 (f)(3)(B). As it is common for remediation 
agreements with the State of Indiana and federal entities not to resolve liability 
for natural resource damages under CERCLA, Shafer presents a potential 
obstacle for PRPs in Indiana. Nonetheless, Shafer leaves open the possibility that 
the receipt of a Certificate of Completion for a property, as well as a factual 
showing that no imminent or substantial threat to human health exists, when 
presented along with an agreement with the State of Indiana pertaining to liability 
may be sufficient to allow the recovery of costs under section 1 13(f)(3)(B). 

B. Other Developments in CERCLA and RCRA 

The Seventh Circuit recently held that courts do not have jurisdiction under 
CERCLA to address citizen suit challenges to cleanup efforts while cleanup 
efforts are underway. In Pollack v. United States Department of Defense, ^^^ a 
citizen plaintiff filed suit against defendants under CERCLA contending that the 
military had "improperly transferred ownership" of a contaminated property in 
violation of CERCLA. ^^^ After the Army closed its operations on the property, 
it transferred control of part of the property, but retained "responsibility and 
liability for environmental restoration of the property." '^^ After the EPA 
discovered waste from the property spilling out into the air and water, the Army, 

173. Uat*21-22. 

174. /J. at*23-24. 

175. Id. The Eastern District of Missouri reached a conclusion similar to the Shafer court, 
holding that a PRP could not pursue a contribution claim under CERCLA section 1 13(f) following 
an entry into an agreement with the State of Missouri because Missouri had '"no CERCLA 
authority absent specific agreement with the federal Environmental Protection Agency'" and the 
agreement that was entered into could be terminated at any time. Westinghouse Elec. Co. v. United 
States, No. 4:03-CV-861-SNL, 2008 U.S. Dist. LEXIS 57232, at *10-15 (E.D. Mo. July 29, 2008) 
(quoting Niagra Mohawk Power Corp. v. Consol. Rail Corp., 436 F. Supp. 2d 398, 402 (N.D.N.Y. 

176. 507 F.3d 522 (7th Cir. 2007). 

177. Id. at 523. 

178. /J. at 524. 

994 INDIANA LAW REVIEW [Vol. 42:973 

along with the U.S. and Illinois EPAs developed and implemented an interim 
plan to address the contamination. ^^^ After the transfers, plaintiff sued alleging 
a violation of CERCLA as the EPA had "not [signed] off on the Army's cleanup 
plan before the property changed hands. "^^° In dismissing the plaintiff s suit, the 
court held that CERCLA section 113(h) deprived the court of jurisdiction to 
address citizen suit challenges to ongoing cleanup efforts and that jurisdiction 
over such citizen suits are limited to those brought after the challenged cleanup 
is completed. ^^^ 

Similarly, in a case of first impression, a district court dismissed a citizen's 
suit brought under the Resource Conservation and Recovery Act (RCRA) after 
the defendant entered into an Administrative Order on Consent (AOC) with the 
EPA to clean up the site under CERCLA. ^^^ Citing CERCLA' s pre-enforcement 
bar, the District Court of the Northern District of Illinois held, in River Village 
West LLC V. Peoples Gas Light & Coke Co.,^^^ that the AOC served to bar the 
citizen's suit as a challenge to a remedial or removal action being supervised by 
the EPA, despite the fact that the AOC was negotiated and signed years after the 
RCRA case was originally filed. ^^"^ 

In the last year, the Northern District of Illinois also interpreted the meaning 
of "disposal" and "sohd waste" under CERCLA and RCRA in its Sycamore 
Industrial Park Associates v. Ericsson, Inc. ^^^ decision. In Sycamore Industries, 
the plaintiff sought to compel the defendant, Ericsson, Inc., to remove asbestos 
insulation located in an old unused boiler system at a site purchased by the 
plaintiffs and to pay costs incurred by the plaintiff in removing the asbestos. ^^^ 
In particular, the plaintiff claimed that by discontinuing use of the boiler-based 
heating system containing asbestos insulation but not removing it from the 
property, Ericsson abandoned it, thereby disposing of hazardous waste under the 
terms of CERCLA and RCRA.^^^ In granting summary judgment, the trial court 
stated that although Ericsson had abandoned the asbestos boiler system on the 
property, the boiler system was not a "solid waste" and had not been "disposed" 
of by Ericsson under CERCLA through the property sale because "the sale of a 

179. Id. Later, the Army submitted a proposed final remedial plan to the Illinois EPA for 
review and comment. Id. 

180. M (citing 42 U.S.C. § 9620(h) (2006)). 

181. Mat 523, 525. 

182. River Vill. W. LLC v. Peoples Gas Light & Coke Co., 618 F. Supp. 2d 847, 855 (N.D. 
111. 2008). 

183. Id. at 852-54 ("Plaintiffs provide no support, nor does it seem that any exists, for their 
contention that RCRA bars only those actions filed after an AOC has been entered with the EPA 
.... A plain language reading of § 1 13(h) demonstrates that the provision makes no reference to 
the timing issues presented by Plaintiffs and speaks in general terms of the inability of federal courts 
to hear challenges to removal or remedial actions."). 

184. Mat 854-55. 

185. 2008 U.S. Dist. LEXIS 1533 (N.D. 111. Jan. 9, 2008), ajf'd, 546 F.3d 847 (7th Cir. 2008). 

186. Mat* 1-4. 

187. M. at*5. 


product which contains a hazardous substance cannot be equated to the disposal 
of the substance itself or even the making of arrangements for its subsequent 
disposal." ^^^ Similarly, the court stated that no liability existed under RCRA 
because the boiler system was not "discarded material" or solid waste as it was 
instead materials fixed to a building itself. ^^^ Furthermore, the court noted that 
the sales contract for the property did not require Ericsson to remove the boiler 
system. ^^^ During the survey period this case was pending review before the 
Seventh Circuit. ^^^ 

C Significant Changes Possible in the Next Year 

In its next term, the U.S. Supreme Court will decide a liability question 
previously believed to have been known — when liability under CERCLA is 
"joint and several" and when it can be "reasonably apportioned." ^^^ The position 
of the EPA, the U.S. Department of Justice, and the Seventh Circuit has long 
been that liability under CERCLA is joint and several, except where a party can 
provide that the harm is divisible. ^^^ Most liable parties, and their lawyers, have 
come to accept this liability scheme as unchangeable. But an oil company and 
two railroads, on the hook for a multi-million dollar cleanup, have urged the U.S. 
Supreme Court to limit how most courts and the federal government approach 
liability under CERCLA. The Court will consider this issue in its review of the 
consolidated decisions of Burlington Northern & Santa Fe Railway Co. v. United 
States and Shell Oil Co. v. United States. '^'^ These two cases contain challenges 
to the federal government on two issues: when so-called arranger liability can 
be imposed, and whether and when liability may be apportioned among multiple 
parties potentially liable for a cleanup. ^^^ 

188. Id. at *7 (citation omitted). 

189. Id. at *16. 

190. Id. at *4-5. 

191. In an opinion outside the survey period, the Seventh Circuit affirmed the trial court's 
decision. Sycamore Indus. Park Assocs. v. Ericsson, Inc., 546 F.3d 847, 854 (7th Cir. 2008), cert, 
denied, 129 S. Ct. 2002 (2009). 

192. The CERCLA statute does not state that liability is joint and several, and the question of 
whether that is what Congress intended has never been decided by the Supreme Court. 

193. See Metro. Water Reclamation Dist. v. N. Am. Galvanizing & Coatings, Inc., 473 F.3d 
824, 827 (7th Cir. 2007) ("For . . . PRPs, liability under § 107(a) is strict, joint and several. In 
other words, by invoking § 107(a), the EPA may recover its costs in full from any responsible party, 
regardless of that party's relative fault."), reh'g denied. 

194. Certiorari was granted by the Court in October 2008. See Shell Oil Co. v. United States, 
129 S. Ct. 30 (2008); Burlington N. & Santa Fe Ry. v. United States, 129 S. Ct. 30 (2008). The 
lower court decision is United States v. Burlington North & Santa Fe Railway Co., 520 F.3d 918 
(9th Cir. 2008), cert, granted, 129 S. Ct. 30 (2008). 

195. Burlington, 520 F.3d at 948. Burlington involves a cost recovery action brought by the 
EPA and a state environmental agency under CERCLA to recover costs spent to clean up 
contamination from land on which a defunct company. Brown & Bryant, Inc. (B & B), operated a 

996 INDIANA LAW REVIEW [Vol. 42:973 

rv. Other Developments in Environmental Law 

A. Courts Examine Use of Nuisance Claims for Environmental Contamination 

Parties have increasingly sought to obtain funds to address environmental 
contamination by using nuisance claims. Indiana defines a nuisance as 
"[w]hatever is: (1) injurious to health; (2) indecent; (3) offensive to the senses; 
or (4) an obstruction to the free use of property; so as essentially to interfere with 
the comfortable enjoyment of life or property. "^^^ An actionable nuisance is "an 
activity that generates injury or inconvenience to others that is both sufficiently 
grave and sufficiently foreseeable that it renders it unreasonable to proceed at 
least without compensation to those that are harmed."^^^ Nuisance law is divided 
into two categories: private nuisance and public nuisance. ^^^ 

In City of Gary v. Shafer,^^^ the court scrutinized the use of nuisance claims 
for environmental contamination brought by current property owners against 
former owners of the same property .^^^ In particular, Gary sought damages from 
former property owners of property transferred to Gary as part of a settlement for 
tax liability under nuisance law.^^^ Gary's subsequent property investigations 

facility that stored and distributed toxic chemicals. Id. at 930-32. Some of the land on which the 
chemical operation was located was owned by the defendant railroads, and some of the chemicals 
used by the company were supplied and delivered by the Shell Oil Company (Shell). Id. Because 
the operator of the facility was a defunct company, it could not contribute to the cleanup costs, and 
the environmental agencies sought to hold the railroad and Shell jointly and severally liable for the 
costs of the cleanup. Id. The district court refused to hold the companies jointly and severally 
liable, but the Ninth Circuit reversed, stating that "there was no reasonable basis for apportioning" 
the damages attributable to the railroads' activity, the oil company, and the defunct company. Id. 
at 930, 937-48. 

196. IND. Code § 32-30-6-6 (2008). 

197. City of Gary v. Smith & Wesson, 801 N.E.2d 1222, 1231 (Ind. 2003). 

198. See Wemke v. Halas, 600 N.E.2d 1 17, 120 (Ind. Ct. App. 1992). Indiana courts have 
held that a private nuisance affects only a "single person or a determinate number of people." Id. 
"The essence of a private nuisance is the use of property to the detriment of the use and enjoyment 
of another's property." Id. (citing Cox v. Schlachter, 262 N.E.2d 550, 553 (Ind. Ct. App. 1970)). 
On the other hand, a public nuisance is "caused by an unreasonable interference with a common 
right." Ind. Limestone Co. v. Staggs, 672 N.E.2d 1377, 1384 (Ind. Ct. App. 1996). Generally, a 
public nuisance affects an entire community or neighborhood, while the effect of a private nuisance 
is peculiar to an individual or a limited number of individuals. See Wendt v. Kerkhof, 594 N.E.2d 
795, 797 (Ind. Ct. App. 1992). 

199. City of Gary v. Shafer, No. 2:07-CV-56-PRC, 2007 U.S. Dist. LEXIS 75503 (N.D. Ind. 
Oct. 4, 2007). 

200. Id. at *7-24. 

201. Id. at *13. Indiana nuisance law is codified at Indiana Code section 32-30-6-7 (2008). 
The City of Gary also sued under Gary Environmental Ordinance section 95.204, however, these 
claims were dismissed as the ordinances were retroactive and were passed after the contamination 


revealed contamination, and Gary filed suit claiming that the conduct of various 
former property owners injured "the City's Property and interfered with the 
City's use and enjoyment of the Property. "^^^ Li rejecting Gary' s nuisance claim, 
the court concluded that Gary's nuisance claim was for private nuisance, and not 
public nuisance, as Gary had not alleged any interference with a "common right" 
of the public but only harm to property owned by Gary.^^^ The court further 
noted that private nuisance actions are premised on the assumption that the 
parties to a nuisance do not have prior contractual relationships wherein their 
interests might have been resolved by agreement.^^"^ As such, because Gary was 
a "purchaser" of the property at issue it could not bring a private nuisance claim 
against a former owner for property.^^^ The court further noted that a 
"purchaser," was not limited to cash buyers, private entities, or individuals who 
obtain property through a conventional money transfer or purchase, but included 
any party who "obtains property from another for either money or other valuable 
consideration" or who has the ability to negotiate with a property's owner/seller 
to account for any defects in the property.^^^ 

Shafer may limit the ability of Lidiana property owners to pursue private 
nuisance claims against former owners of the same property, but it does not 
address the viability of public nuisance claims based on an interference with a 
"common right" likely to exist when groundwater, multiple or adjacent 
properties, or parks are contaminated. Even though Shafer is not binding on 
Indiana state courts, its holding may reduce the willingness of risk adverse 
municipalities to enter into tax settlements that allow individuals or corporations 
to reduce their tax liability by transferring potentially contaminated property to 
the municipality. 

B. Court Jurisdiction to Review IDEM Actions for 
Confined Feeding Operations 

In Save the Valley, Inc. v. Ferguson,^^^ the Indiana Court of Appeals held that 
it lacked subject matter jurisdiction to consider a lawsuit seeking private (as 
opposed to "in the name of the State of Indiana" under Indiana Code section 13- 
30- 1-1 f^^ declaratory and injunctive relief for activity regulated by IDEM.^^^ At 
issue was IDEM's grant of a permit to the defendant to construct a hog farm as 
a "confined feeding operation" (CEO) as defined in Indiana Code section 13-11- 

at issue occurred. Shafer, 2007 U.S. Dist. LEXIS 75504, at *2-3. 

202. Shafer, 2007 U.S. Dist. LEXIS 75503, at *9. 

203. M at*8-9, *15-16. 

204. Id. at *1 1-16 (citing Lilly Indus, v. Health-Chem Corp., 974 F. Supp. 702, 706 (S.D. Ind. 

205. Id. 

206. Id. at * 13- 17 (citing Lilly, 974 F. Supp. at 702). 

207. 896 N.E.2d 1205 (Ind. Ct. App. 2008). 

208. Id. at 1205 n.2 (citing iND. CODE § 13-30-1-1 (2008)). 

209. Mat 1207. 

998 INDIANA LAW REVIEW [Vol. 42:973 

2-40.^^^ Because CFOs require an IDEM permit before they can be constructed, 
and because IDEM is statutorily authorized to pursue injunctive relief, impose 
penalties, and to order corrective action, ''it is clear that the Indiana General 
Assembly has charged IDEM with the responsibility of regulating potential harm 
from the operation of CFOs."^^^ In the absence of a claim for damages, Indiana 
courts therefore lack subject matter jurisdiction to consider plaintiffs' claims that 
the CEO had not been constructed within the two years of its permitting as 
required by law and that, if constructed, the CEO would irreparably harm their 

C. Decisions Pertaining to Clean Water Act Regulations 

The Clean Water Act (CWA),^^^ among other things, regulates the discharge 
of pollutants and other materials into navigable waters and sets quality standards 
for surface waters.^^"^ One CWA case decided last year was City of Portage v. 
South Haven Sewer Works, Inc.^^^ in which the Indiana Court of Appeals held 
that the Indiana Utility Regulatory Commission improperly permitted the owner- 
operator of a wastewater collection and treatment system to expand its Certificate 
of Territorial Authority (CTA).^^^ The expansion was improper because the 
owner-operator did not obtain the EPA's advance consent, in violation of the 
unambiguous requirements of a consent decree previously entered against it.^^^ 
In so ruling, the court rejected the Commission and the owner-applicant's claim 
that the advance-consent requirement infringed upon Indiana's Tenth 
Amendment authority to determine the geographical boundaries of utilities within 
its borders.^^^ Because the owner-operator had voluntarily agreed to the consent 
decree and, in any event, the ultimate decision about whether to expand the CTA 
rested with the Commission so long as the prerequisites had been met, there was 
no infringement upon Indiana's regulatory authority.^^^ 

In the past year, the U.S. District Court for the Southern District of Indiana 
also issued an instructional opinion in United States v. Hagerman,^^^ where the 
court applied the federal sentencing guidelines to an executive convicted of 
violating the CWA. Under the CWA, the discharge of pollutants into navigable 
waters requires a permit.^^^ Permit holders are required to test their effluents to 

210. Id. Sit 1206 n.3. 

211. Id. at 1206. 

212. Id. at 1206-07. 

213. 33 U.S.C. §§ 1251-1387 (2006). 

214. Id. §§ 1311, 1313, 1344. 

215. 880 N.E.2d 706 (Ind. Ct. App. 2008). 

216. Mat 712. 

217. Id. 

218. Id. 

219. Id. 

220. 525 F. Supp. 2d 1058 (S.D. Ind. 2007), qff'd, 555 F.3d 553 (7th Cir. 2009). 

221. 33 U.S.C. §§ 1311(a), 1342 (2006). 


determine whether they comply with their permit conditions, and to report the 
results of those tests.^^^ At issue in Hagerman was the proper total offense level 
for a corporate executive convicted on ten counts of knowingly submitting a false 
testing report, each of which was a felony.^^^ Because the court found that the 
defendant's recordkeeping offenses were designed to conceal a substantive 
environmental offense, the Sentencing Guidelines called for the application of 
specific offense characteristics otherwise only applicable to substantive 
environmental crimes.^^"^ The court rejected the defendant's claim that only the 
base offense level could be considered as this conflicted with the plain 
Guidelines instructions and holding otherwise would reward defendants whose 
successful fraudulent recordkeeping prevented prosecution for substantive CWA 
offenses.^^^ Further, it rejected the claim of an amicus curiae that the Sentencing 
Commission assigned unreasonably high punishments to CWA violations. ^^^ 
After determining the total offense level, and adding additional levels required 
for the offender-specific portion of the calculation, the court sentenced the 
defendant to sixty months, within the Sentencing Guidelines range.^^^ 

D. Attorneys Fees, Costs, and Punitive Damages in 
the Environmental Context 

Jn Greenfield Mills, Inc. v. Carter, ^^^ the U.S. District Court for the Southern 
District of Indiana ruled that fee awards were available under the CWA where 
one party has succeeded on the merits of at least some of its claims. ^^^ 
Greenfield Mills is an opinion rendered in response to a plaintiff's motion for an 
interim award of attorneys' fees and costs after the Indiana Attorney General 
refused to approve a settlement with the plaintiff riparian owners and users of a 
downstream stretch of river who the court found had been adversely affected by 
dredging performed by the Indiana Department of Natural Resources. ^^^ 

Although the Greenfield Mills opinion deals mainly with the technicalities 
of calculating attorney fee and cost awards, it is significant because it 
demonstrates that under the CWA, like other fee shifting statutes, interim fee 
awards may be made where one party has succeeded on the merits of at least 
some of its claims. The interim fee award under the CWA was particularly 

222. Id. § 1318; 40 C.F.R. § 122.41 (2008). 

223. Hagerman, 525 F. Supp. 2d at 1059-62; see also 33 U.S.C. § 1319(c)(4) (2006). 

224. Hagerman, 525 P. Supp. 2d at 1062 (citing U.S. SENTENCING GUIDELINES MANUAL § 
2Q 1.2(b)(5) (2009)). 

225. Id. at 1062-63. 

226. Id. at 1064-65. 

227. Id. at 1065-66. In an opinion outside the period covered by this Survey, the Seventh 
Circuit affirmed the trial court's sentence and decision to admit into evidence copies of test results 
from the defendant's employees. United States v. Hagerman, 555 F.3d 553 (7th Cir. 2009). 

228. 569 F. Supp. 2d 737 (N.D. Ind. 2008). 

229. /J. at 743. 

230. /J. at 741-43. 

1000 INDIANA LAW REVIEW [Vol. 42:973 

justified in this case because plaintiffs had obtained substantial relief and caused 
a permanent change in policy and law, not only by persuading defendants to 
stipulate to a permanent injunction enjoining them from operating dams or other 
structures in a manner that violated the CWA, but also by affecting a change in 
national policy whereby the U.S. Army Corps of Engineers issued guidance to 
governmental agencies regarding releases of sediments by or through dams.^^^ 
Thus, given the demonstrable damage suffered by the plaintiffs, the implications 
of the case, the time elapsed during the litigation, and the disparate resources of 
the parties, the court found an interim fee award pursuant to the Clean Water Act 
appropriate.^^^ In fact, the court went so far as to state that the failure to grant the 
fee petition would be an abuse of discretion given the facts of this particular 

In another decision stemming from a petition for attorney fees and costs, 
Wickens v. Shell Oil Co.^^^ the U.S. District Court for the Southern District of 
Indiana also awarded corrective action costs, attorneys' fees and court costs to 
the prevailing party under Indiana's USTA.^^^ After protracted and highly 
contentious litigation, the parties successfully negotiated a settlement on the 
merits, but left for the court's resolution the amount of corrective action costs 
and attorneys' fees plaintiff could recover.^^^ 

Ultimately, the court determined that both investigative and remedial 
expenses were recoverable "corrective action costs" under the USTA.^^^ The 
court awarded plaintiffs a judgment for his environmental consultant's invoices 
less amounts expended on "litigation support" activities and amounts incurred 
during a period when the court ordered no additional fees or costs be incurred 
without a showing of clear necessity, which had not been made.^^^ The court 
likewise awarded attorneys' fees and court costs, engaging in a lengthy analysis 
of the submitted invoices and the parties' positions regarding the amounts 
requested.^^^ The court concluded that although plaintiff could recover the 
amounts previously deducted from the consultant's invoices as recoverable 
litigation support disbursements, attorneys' fees for pursuit of non-USTA claims 
were not recoverable, nor were fees incurred after the time when Shell made it 
clear it was willing to assume full responsibility for the site efforts, as after that 

231. Mat 743-44. 

232. Id. 

233. /J. at 744. 

234. 569 F. Supp. 2d 770 (S.D. Ind. 2008), modified by 2009 WL 1582971 (S.D. Ind. June 3, 

235. Id. at 793-95. The USTA is codified at Indiana Code sections 13-23-1-1 to -16-4 (2008). 

236. Greenfield Mills, 569 F. Supp. 2d at 773-84. The court's analysis was complicated by 
several factors, including the fact that plaintiffs environmental consultant undertook testing of a 
neighboring property without any directive requiring it to do so, the generally contentious nature 
of the litigation, and the combative stances taken by counsel. See id. 

237. Id. at 783-84. 

238. /J. at 784-88. 

239. Mat 788-95. 


point plaintiff s counsel only benefited from prolonging the litigation.^'^^ Finally, 
the court denied any award of prejudgment interest because a good faith dispute 
existed as to the reasonable amount of attorneys' fees and costs.^"^^ 

In an issue of first impression, the U.S. Supreme Court held in Exxon 
Shipping Co. v. Baker, ^^^ that the CWA's water pollution penalties did not 
preempt punitive damages in maritime spill cases, but that punitive damages in 
maritime law should be subject to a one-to-one ratio, thus capping punitive 
damages at an amount equal to compensatory damages. ^"^^ However, the Court 
was equally divided on the issue of whether maritime law allows corporate 
liability for punitive damages for the acts of managerial agents.^'^'* As a result, the 
Court left the court of appeals decision undisturbed on that issue.^"^^ 

E. Developments in Indiana Environmental Insurance Law 

During the survey period, the Indiana Supreme Court granted transfer in two 
cases that raise a number of important insurance coverage issues (such as policy 
assignment and notice requirements) that often come up when policyholders 
make claims in environmental cases involving soil and/or groundwater 

The Indiana Supreme Court will first consider Dreaded, Inc. v. St. Paul 
Guardian Insurance Co. , in which the Indiana Court of Appeals reversed the trial 
court's grant of summary judgment in favor of an insurer due to delayed notice 
of a claim to the insurer. ^"^^ Dreaded, Inc. (Dreaded) sought reimbursement of 
defense costs for an environmental liability claim incurred prior to notifying its 
general liability insurer of the claim.^"^^ Dreaded received a suit letter from IDEM 
on November 17, 2000, and took steps to respond, including hiring legal counsel 
and an environmental consultant, but did not tender the claim to its liability 
insurer until March 24, 2004.^"^^ Both the trial court and the court of appeals 
found that Dreaded' s delay in notifying its insurer was unreasonable and thus, 
that a presumption existed that the insurer was prejudiced by the delay.^"^^ 

However, unlike the trial court, the court of appeals held that the evidence 

240. See id. at 790-95. 

241. Id. at795. 

242. 128 S. Ct. 2605 (2008). Baker stems from the 1989 Exxon Valdez environmental 
disaster. Id. at 2608. A jury awarded the class plaintiffs $507.5 million in compensatory damages 
and $4.5 billion in punitive damages, reduced by the Ninth Circuit Court of Appeals to $2.5 billion. 
/J. at 2608-11. 

243. Id. at 2633. 

244. Id. at 2616. 

245. Id. at 2634. 

246. Dreaded, Inc. v. St. Paul Guardian Ins. Co., 878 N.E.2d 467, 474 (Ind. Ct. App. 2007) 
trans, granted, 891 N.E.2d 48 (Ind. 2008), vacated, 904 N.E.2d 1267 (Ind. 2009). 

247. Mat 469-70. 

248. Id. 

249. Id. at 469, 472-73. 

1002 INDIANA LAW REVIEW [Vol. 42:973 

designated by Dreaded was sufficient to raise a genuine issue of material fact as 
to prejudice to the insurer, precluding summary judgment.^^^ Specifically, 
Dreaded set forth evidence demonstrating that once the insurer received notice, 
it continued to defend the claim just as Dreaded had and that the actions taken 
were appropriate and necessary to defend against the environmental liability 
claim.^^' As a result, the issue of whether the insurer was prejudice by the late 
notice was one for the trier of fact and summary judgment on that issue was not 
warranted.^^^ The court of appeals thus affirmed the trial court' s finding that the 
insured's delay was unreasonable, but reversed as to the issue of prejudice and 
remanded the case for further proceedings. 

The Indiana Supreme Court also agreed to review the Indiana Court of 
Appeals' decision in Travelers Casualty & Surety Co. v. United States Filter 
Corp.,^^^ a case that raises issues pertaining to the assignment of policies. U.S. 
Filter involved a situation where five companies sought insurance coverage for 
bodily injury claims involving the operation of industrial blast machines.^^"^ The 
Indiana Supreme Court issued an opinion after the survey period holding that the 
policies were not properly transferred.^^^ A full analysis of this opinion, and the 
underlying facts, will be addressed in next year's article. 


The cases in this survey period reflect the changing priorities of 
environmental law. In many ways the law was clarified, as with the Pflanz 
clarification of the statute of limitations period for the USTA. Yet, in others, and 
in particular with the CAA, court decisions have left many areas of 
environmental regulation up in the air. As such, the contours of environmental 
obligations are in many ways in flux, with the CAA regulations exemplifying the 
inherent difficulties in developing consistent and equitable standards necessary 
to move forward in protecting our environment. 

250. Mat 473-74. 

251. Mat 474. 

252. Mat 473-74. 

253. Travelers Cas. & Sur. Co. v. U.S. Filter Corp., 870 N.E.2d 529 (Ind. Ct. App.), trans, 
granted, 878 N.E.2d 222 (Ind. 2007), vacated, 895 N.E.2d 1 172 (Ind. 2008). 

254. Mat 533-39. 

255. Travelers Cas. & Sur. Co., 895 N.E.2d 1 172, 1 180-81 (Ind. 2008). 

Survey of Recent Developments in 
Health Care Law 

Hall, Render, Killian, Heath & Lyman, P.C.' 


Healthcare in Indiana, as in the rest of the United States, is governed by an 
evolving and changing body of law, both state and federal, covering a vast 
number of topics. Although not an exhaustive review, this Survey summarizes 
recent developments in various areas of health law including: fraud and abuse, 
quality, tax, reimbursement, and labor and employment. 

I. General Health Law 

In 2008, there were several interesting cases impacting health care providers. 
Two notable cases include Poliner v. Texas Health System^ and United States ex 
rel Bates and Patrick v. Kyphon, Inc? involving peer review and a qui tarn 
complaint, respectively. These cases are summarized below. 

A. Peer Review 

The 2007 Survey of Recent Developments in Health Law in the Indiana Law 
Review reported on the decisions from a district court in Texas in the Poliner v. 
Texas Health System^ case, and described the dramatic impact these decisions 
had on the landscape of peer review."^ However, following publication of the 
2007 Survey, the defendants appealed to the Fifth Circuit.^ The court issued a 
decision reversing the district court on July 23, 2008.^ 

Poliner is based upon a lawsuit with numerous claims brought by Lawrence 
Poliner, M.D. and his professional corporation against Texas Health Systems and 
several physicians, alleging that the defendants ''improperly and maliciously used 
the peer-review process to summarily suspend [his] privileges, thereby causing 
damage to his interventional cardiology practice."^ In September 2003, the 
United States District Court for the Northern District of Texas, Dallas Division, 
"granted in part and denied in part [djefendants' motion for summary judgment 

* The following Hall, Render, Killian, Heath & Lyman attorneys contributed to the research 
and drafting of this Survey: Kimberly S. Adams, Calvin R. Chambers, Thomas M. Donahoe, Mark 
E. Douglas, Natalie L. Dressel (clerk), Robin E. Ebert, Kimberly A. Emil, Mary C. Gaughan, 
Michael R. Greer, Clifton E. Johnson, and Jennifer P. Viegas. 

1. 537 F.3d 368 (5th Cir. 2008), cert, denied, 129 S. Ct. 1002 (2009). 

2. No. 05-CV-6568CJS(f) (W.D.N.Y., filed Oct. 25, 2005). 

3. 537 F.3d 368 (5th Cir. 2008), cert, denied, 129 S. Ct. 1002 (2009). 

4. Ice Miller LLP, Survey of Recent Developments in Health Law, 40 IND. L. REV. 93 1 , 946- 
51 (2007). 

5. Poliner, 537 F.3d at 375. 

6. Mat 384. 

7. Poliner v. Tex. Health Sys., No. Civ. A.3:00-CV-1007-P, 2006 WL 770425, at *1 (N.D. 
Tex. 2006), rev'd, 537 F.3d 368 (5th Cir. 2008), cert, denied, 129 S. Ct. 1002 (2009). 

1004 INDIANA LAW REVIEW [Vol. 42: 1003 

on all of [p]laintiffs' claims."^ The claims not dismissed on summary judgment 
were submitted to a jury, who found that defendants' actions were not immune 
from civil liability under the federal Health Care Quality Improvement Act 
(HCQIA) or state peer review statutes, and in favor of plaintiffs on all of their 
other claims.^ "The jury awarded compensatory and exemplary damages against 
[d]efendants in the total amount of $366,21 1,159.30."^^ 

Following an unsuccessful mediation, plaintiffs moved to have the judgment 
entered, and the defendants moved to renew their motion for judgment 
notwithstanding the verdict, arguing that the defendants were entitled to 
immunity under the HCQIA or state peer review statutes. ^^ The court found that 
sufficient evidence existed in support of the jury's decision that the defendants 
were not entitled to immunity under HCQLA or state law.^^ The court, in a 
separate order, addressed the defendants' motion for a new trial and remittitur, 
but ultimately denied the motion for a new trial. ^^ Although the motion was 
denied, the court did reduce the verdict to approximately $22.5 million, because 
it found the jury's verdict to be excessive. ^"^ 

The United States Court of Appeals for the Fifth Circuit later reversed the 
lower court's decision on based on the defendants being entitled to immunity 
under the HCQIA. ^^ The court held, "Because [d]efendants are immune under 
the HCQIA, we have no occasion to consider [d]efendants' other substantial 
arguments that we must reserve and render judgment based on state law 
immunity and because Poliner failed to prove the substantive elements of his 

In arriving at the decision that the defendants were immune under the 
HCQIA, the court examined the factors set out in HCQIA ^^ and concluded that 
the professional review actions taken by the defendants were done "in the 
reasonable belief that the action was in the furtherance of quality health care," 
that defendants made "a reasonable effort to obtain" the facts, that defendants 
satisfied the notice and hearing requirements, and that the peer review action 
taken by defendants was taken "in the reasonable belief that the action was 
warranted by the facts known after such reasonable effort to obtain facts."^^ The 
court elaborated on the application of these elements, stating that (1) the HCQIA 

8. Id. 

9. M at*2. 

10. Id. 

11. Id. 

12. /J. at*5. 

13. See Poliner v. Tex. Health Sys., 239 F.R.D. 468 (N.D. Tex. 2006), rev'd, 537 F.3d 368 
(5th Cir. 2008), cert, denied, 129 S. Ct. 1002 (2009). 

14. Mat 478. 

15. Poliner v. Tex. Health Sys., 537 F.3d 368, 385 (5th Cir. 2008), cert, denied, 129 S. Ct. 
1002 (2009). 

16. Id. at 385 (footnote omitted). 

17. Id. at 376-77 (citing 42 U.S.C. § 1 1 12(a) (2006)). 

18. See id. at 378-85. 

2009] HEALTH CARE LAW 1005 

was "intended to create an objective standard of performance, rather than a 
subjective good faith standard," ^^ (2) HCQIA does not require that the peer 
review action result in an actual improvement in the quality of care,^^ (3) the 
"good or bad faith of the reviewers is irrelevant,"^ ^ (4) an ultimate decisionmaker 
is not required to investigate the matter independently but is only required to 
make a "reasonable effort to obtain the facts,"^^ and (5) "HCQL\ immunity is not 
coextensive with compliance with an individual hospital's bylaws."^^ Poliner 
appealed, but on March 23, 2009, the United States Supreme Court denied the 
certiorari. ^"^ 

The most recent Poliner decision provides some reassurance for health care 
providers in that immunity under the HCQL\ can be extended to those who 
perform professional review actions which conform to the applicable standards 
and serve as a shield from damages. The decision applies the presumption found 
in § 111 12(a) of title 42^^ that "a professional review action shall be presumed 
to have met the [applicable standards] . . . unless the presumption is rebutted by 
a preponderance of the evidence."^^ 

B. Medtronic -Kyphon Settlement 

One of the most interesting False Claims Act^^ cases impacting healthcare 
providers in 2008 is the Medtronic settlement.^^ The settlement demonstrates the 
risks associated with a healthcare provider's reliance on reimbursement advice 
from a medical device manufacturer.^^ 

On October 25, 2005, former Kyphon employees Charles Bates, HI and Craig 
Patrick filed a qui tarn complaint against Kyphon, Inc.^^ alleging violations of the 
False Claims Act.^^ Bates and Patrick later amended the complaint to include 

19. Id. at 376. 

20. Id. at 378. 

21. Id. (quoting Brader v. Allegheny Gen. Hosp., 167 F.3d 832, 840 (3d Cir. 1999)). 

22. Id. at 380 (internal quotes omitted). 

23. Id. 

24. Poliner v. Tex. Health Sys., 129 S. Ct. 1002 (2009) (mem.). 

25. See Poliner, 537 F.3d at 377. 

26. 42 U.S.C. § 1 1 1 12(a) (2006). 

27. 31 U.S.C. §3729(2006). 

28. Subsequent to the filing of the qui tarn action, Kyphon was acquired by Medtronic in 

29. Dep't of Justice, Medtronic Spine, Formerly Kyphon, Inc., to Pay U.S. § 75 
Million to Resolve Allegations of Defrauding Medicare (2008), available at http://www. 

30. United States ex rel. Bates & Patrick v. Kyphon, No. 05-CV-6568CJS(f) (W.D.N. Y., filed 
Oct. 25, 2005). Subsequent to the filing of the qui tam action, Kyphon was acquired by Medtronic 
in 2007. 

31. Id. 

1006 INDIANA LAW REVIEW [Vol. 42: 1003 

claims against Sisters of Charity Hospital. ^^ Bates was a former Kyphon sales 
representative while Patrick was a former Kyphon reimbursement manager.^^ 
According to the qui tarn complaint, Kyphon illegally marketed its kyphoplasty 
procedure by encouraging physicians to perform the procedure and to claim 
reimbursement unnecessarily treating the procedure as an inpatient service.^"^ 

The lawsuit described kyphoplasty as a minimally-invasive surgery used to 
treat vertebral compression fractures most commonly caused by osteoporosis in 
the elderly population.^^ The kyphoplasty restores the size and strength of the 
fractured, collapsed vertebra. According to the complaint, the procedure 
involves the insertion of an inflatable balloon into the vertebra in order to restore 
partially vertical height and to create a cavity in which to inject a viscous bone 
cement.^^ The cement in turn strengthens the broken vertebra, secures the 
vertebra in its original height and position, and supports the surrounding bone to 
prevent further collapse. ^^ This procedure is usually performed by orthopedic 
surgeons and interventional radiologists under general anesthesia or conscious 
sedation.^^ Kyphoplasty can generally be done on an outpatient basis and 
inpatient stays are only expected in rare cases where the patient is frail or other 
medical issues require further monitoring following the procedure.^^ 

Despite the minimal invasiveness of the procedure, the complaint alleged that 
approximately eighty-ninety percent of the 150,000 kyphoplasty procedures 
performed from 1999 to 2005 were unnecessarily performed as inpatient, rather 
than outpatient, procedures as a result of Kyphon' s misleading marketing 
practices. "^^ 

On May 20, 2008, Medtronic Spine, LLC (Medtronic) announced a $75 
million settlement of the qui tarn lawsuit.'*^ In addition to paying the $75 million 
fme, Medtronic also agreed, as part of the settlement, to enter into a corporate 
integrity agreement (Agreement) with the United States Department of Human 
Services, Office of Inspector General."^^ The Agreement contained measures to 
ensure compliance with Medicare regulations and policies in the future. "^^ As a 
result of the settlement, the qui tarn relators received a total of $14.9 million as 
their statutory share of the proceeds. "^"^ The Medtronic-Kyphon settlement ranks 

32. First Amended Complaint at 1 , United States ex rel. Bates & Patrick v. Kyphon, Inc. and 
Sisters of Charity Hospital, No. 05-CV-6568CJS(f) (W.D.N.Y., filed Jan. 5, 2006). 

33. MM 14-17. 

34. Id.f4. 

35. Id. n 54-59. 

36. Mffl 64-65. 

37. Id. n ^5-66. 

38. Id.f2\. 

39. Id. f6S. 

40. /J. 15. 

41. See Dep'T OF JUSTICE, supra note 29. 

42. Id. 

43. Id. 

44. Id. 

2009] HEALTH CARE LAW 1007 

as the fifty-eighth largest False Claims Act settlement to date."^^ 

n. Fraud & Abuse 

A. Starkly 

On August 19, 2008, the Centers for Medicare & Medicaid Services (CMS) 
issued the final Hospital Inpatient Prospective Payment Systems rule for fiscal 
year 2009 (Final Rule) which, in part, finalized several new Stark regulations."^^ 

1. Changes to Physician ''Stand in the Shoes'' Regulations. — In the Stark 
Phase ni final regulations effective December 4, 2007, CMS implemented a 
"stand in the shoes" rule under which referring physicians were treated as 
standing in the shoes of their physician organization for purposes of applying the 
direct and indirect compensation exceptions. "^^ As a result, many compensation 
arrangements between entities providing designated health services (DHS) and 
physician groups that previously were indirect compensation arrangements or did 
not meet the definition of an indirect compensation arrangement under Stark (and 
thus may not have been subject to Stark at all), were treated as direct 
compensation arrangements between the DHS entities and the groups' referring 
physicians. "^^ Therefore, these arrangements were required to be restructured in 
order to satisfy all of the elements of a direct compensation exception."^^ 

In an attempt to simplify the application of the stand in the shoes regulations 
in the Final Rule, CMS finalized revisions to the physician "stand in the shoes" 
provisions that deem a physician who has an ownership or investment interest in 
a physician organization to "stand in the shoes" of that physician organization.^^ 
Physicians with only a "titular" ownership interest — physicians that do not have 
the "ability or right to receive the financial benefits of ownership or investment, 
. . . [such as] the distribution of profits, dividends, proceeds of sale, or similar 
returns on investment" — and non-owner physician employees or independent 
contractors would not be deemed to "stand in the shoes" of their physician 
organizations.^^ Further, CMS clarified that the physician "stand in the shoes" 
provisions do not apply to arrangements that satisfy the academic medical centers 

Nonetheless, in the preamble to the Final Rule, CMS noted that the revised 
regulations p^rm/r non-owner physicians and titular owners to stand in the shoes 

45. Top 100 False Claims Act Cases, (last visited July 5, 

46. Changes to Disclosure of Physician Ownership in Hospitals and Physician Self-Referral 
Rules, 73 Fed. Reg. 48,434, 48,688-48,754 (Aug. 19, 2008) (to be codified at C.F.R. pt. 411). 

47. Id. at 48,695 (citing 42 C.F.R. § 41 1.357(p) (2008)). 

48. Id. 

49. Id. 

50. Id. at 48,753 (to be codified at 42 C.F.R. § 41 1.354(c)(l)(ii)). 

51. Id. (to be codified at 42 C.F.R. § 41 1.354(c)(3)(ii)(C)). 

52. Id. at 48,698. 

1008 INDIANA LAW REVIEW [Vol. 42: 1003 

of their physician organizations.^^ Per CMS, the purpose of this "permissive" 
regulation is to allow parties the flexibility to structure compensation 
arrangements in a manner that satisfies a direct compensation arrangement (as 
opposed to an indirect compensation arrangement exception or no exception at 
all) in order to comply with Stark.^"^ CMS indicated that it believes that "[t]his 
approach is consistent with [its] longstanding view that parties are entitled to use 
any available exception of which they satisfy all of the applicable 

CMS noted that as a result of the Phase IE "stand in the shoes" rule, many 
arrangements between DHS entities and physician organizations had to be 
restructured or initially structured by December 4, 2007, to meet an exception for 
direct compensation arrangements.^^ Accordingly, in the Final Rule, CMS 
clarified that "such arrangements do not need to be restructured" again to comply 
with the revised stand in the shoes regulations until the expiration of the original 
term or renewal term of the agreement.^^ Additionally, the parties can elect to 
continue having the non-owner physicians stand in the shoes of their physician 
organization, as was required under Stark HI, in order to avoid restructuring an 

2. New Limitations Placed on Services Performed for Hospitals and Other 
DHS Entities (including " Under Arrangements " j- — The Stark law prohibits both 
a physician from making referrals for DHS to an entity with which the physician 
(or an immediate family member) has a financial relationship and prohibits the 
entity from billing Medicare for the DHS, unless an exception applies.^^ Under 
the Phase I definition of "entity," an "entity" includes only the person or entity 
that bills Medicare for the DHS — not the person or entity that performs the DHS 
where such person or entity — is not also the person or entity billing for it.^^ 

In this version of the Final Rule, CMS amended the definition of "entity" to 
clarify that a person or entity is considered to be "furnishing" DHS if it "[i]s the 
person or entity that has performed' the DHS (notwithstanding that such entity 
did not actually bill the services), ^^ Note that where an "under arrangements" 
service provider "performs" a service that is billed by another entity, both the 
"under arrangements" service provider and the billing entity are DHS entities 
with respect to that service.^^ CMS does not define "perform" specifically, but 
it appears that the "hands-on" medical or clinical work would fall under this 


Id. at 48,690. 


/J. at 48,695. 









59. 42 U.S.C. § 1395nn(a)(l) (2006). 

60. 42 C.F.R. §411.351(2008). 

6 1 . Changes to Disclosure of Physician Ownership in Hospitals and Physician Self-Referral 
Rules, 73 Fed. Reg. at 48,751 (to be codified at 42 C.F.R. § 41 1.351) (emphasis added)). 

62. Id. at 48,721. 

2009] HEALTH CARE LAW 1009 


Thus, where an "under arrangements" service provider (e.g., a joint venture, 
physician group practice, or other physician organization) ''performs" the 
services and, pursuant to a contractual arrangement, a hospital bills for those 
services, the services are DHS and the "under arrangements" service provider 
would be a DHS entity with respect to those services. ^^ If the referral to the 
"under arrangements" service provider is made by a physician owner or investor 
in such provider, an ownership exception must be met to protect the referral. ^"^ 

CMS delayed the effective date of the amendment to the definition of 
"entity" until October 1, 2009, in order to afford parties adequate time to 
restructure arrangements.^^ 

3. Percentage-Based Compensation Arrangements Prohibited for Office 
Space and Equipment Lease Arrangements Only. — In the Final Rule, CMS 
revised the rental of office space,^^ rental of equipment,^^ fair market value 
compensation arrangement exceptions'^ (all of these are "direct" exceptions), and 
the indirect compensation arrangement exception'^ to prohibit the use of 
compensation formulae based on "[a] percentage of the revenue raised, earned, 
billed, collected, or otherwise attributable to the services performed or business 
generated" in leased space or by the use of leased equipment.^^ 

In the Final Rule, CMS clarified that it does not consider these changes in the 
Final Rule to prohibit the imposition or levy of a percentage of expenses (e.g., 
property taxes or utilities) by a third party or a lessor from charging a lessee a pro 
rata share of expenses incurred that are attributable to that portion of the medical 
office building or other space or equipment that is leased by a lessee.^^ Although 
CMS only finalized the percentage-based compensation formulae prohibition 
with respect to space and equipment leases (the prohibition was not extended to 
arrangements for non-professional services such as management or billing 
services), CMS intends to continue monitoring percentage-based compensation 
arrangements between DHS entities and physicians and may further restrict such 
arrangements as appropriate.^^ 

CMS noted that the Final Rule's restrictions on the use of percentage-based 
compensation formulae for determining rental charges for the lease of space and 
equipment "may require the restructuring or termination of arrangements for the 
rental of space and equipment."^^ Therefore, CMS has delayed the effective date 

63. Id. 

64. Id. 

65. Id. 

66. Id. at 48,752 (to be codified at 42 C.F.R. § 41 1.357(a)). 

67. Id. (to be codified at 42 C.F.R. § 41 1.357(b)). 

68. Id. (to be codified at 42 C.F.R. § 41 1.357(1)). 

69. Id. (to be codified at 42 C.F.R. § 41 1.357(p)). 

70. Id. (to be codified at 42 C.F.R. § 41 1.357(a)). 

71. Id. at 48,711. 

72. /J. at 48,710. 

73. Mat 48,713. 

1010 INDIANA LAW REVIEW [Vol. 42: 1003 

of these regulations until October 1, 2009/"^ 

4. Restrictions on Unit- of -Service (Per-Click) Payments in Space and 
Equipment Lease Arrangements. — CMS revised the lease exceptions for office 
space and equipment, the fair market value exception, and the exception for 
indirect compensation arrangements to provide that Unit of Service (per-click) 
rental charges are not allowed "to the extent that such charges reflect services 
provided to patients referred [by the lessor to the lessee]. "^^ The rulemaking 
clearly articulates, 

The prohibition on per-click payments for space or equipment used in 
the treatment of a patient referred to the lessee by a physician applies 
regardless of whether the physician is the lessor or whether the lessor is 
an entity in which the referring physician has an ownership or 
investment interest. The prohibition also applies where the lessor is a 
DHS Entity that refers patients to a physician lessee or a physician 
organization lessee.^^ 

CMS delayed the effective date of these amendments until October 1, 2009, 
in order to afford parties adequate time to restructure arrangements.^^ 

5. Expansion of Obstetrical Malpractice Insurance Subsidy Arrangements. — 
In the Final Rule, CMS revised this exception by separating it into two 
subsections. First, section 411.357(r)(l) retains the provisions of the current 
exception.^^ New section 411.357(r)(2) allows hospitals, federally qualified 
health centers, and rural health clinics to provide an obstetrical malpractice 
insurance subsidy to a physician who regularly "engages in obstetrical practice 
as a routine part of his or her medical practice" that is: (1) "located in a rural 
area, primary care HPSA, rural area, or an area with a demonstrated need ... as 
determined by the Secretary in an advisory opinion"; or (2) is comprised of 
patients "[a]t least [seventy-five] percent of the physician's obstetrical patients 
reside in a medically underserved area or are part of a medically underserved 

6. Ownership or Investment Interest in Retirement Plans. — CMS revised the 
definition of ownership or investment interest out of concern that physicians may 
be using retirement plans as a vehicle "to purchase or invest in other entities . . 
. to which they refer patients for DHS."^^ 

7. Outer Limits on the Period of Disallowance. — In the Final Rule, CMS 
provided that the "period of disallowance" begins when the "financial 
relationship fails to satisfy the requirements of an applicable exception."^ ^ A 

74. Id. 

75. Id. at 48,752 (to be codified at 42 C.F.R. § 41 1.357(b)). 

76. Mat 48,7 14. 

77. Id. 

78. Id. at 48,753 (to be codified at 42 C.F.R. § 41 1.357(r)(l)). 

79. Id. (to be codified at 42 C.F.R. § 41 1.357(r)(2)(B)). 

80. Id. at 48,737. 

81. Id. at 48,700. 

2009] HEALTH CARE LAW 101 1 

period of disallowance is the time in which a physician cannot refer DHS to an 
entity and an entity cannot bill Medicare because the financial relationship 
between the referring physician and the entity fails to meet all of the 
requirements of a Stark exception.^^ When noncompliance is not due to a 
compensation matter, the period of disallowance ends when "the financial 
relationship satisfies all of the requirements of the applicable exception."^^ In 
cases where the noncompliance is tied to compensation, the period of 
disallowance ends no later than the date on which all "excess compensation is 
returned to the party that paid it," or the date on which all "additional required 
compensation is paid to the party to which it is owed."^"^ 

8. Alternative Method for Compliance and New Guidance on Missing 
Signatures. — The Final Rule also created a new paragraph to section 41 1.353, 
which provides that "payment may be made to an entity that submits a claim or 
bill for [DHS] if the financial relationship between the entity and the referring 
physician "fully complied with an applicable exception [under section 41 1 .357], 
except with respect to the signature requirement," and provided that the 
necessary signatures are obtained within ninety days of the commencement of the 
financial relationship if the failure to comply with the signature requirement was 
"inadvertent," or within thirty days if the failure to comply was "not 

In order to take advantage of the alternative method for compliance in section 
411 .353(g), the financial relationship at issue must satisfy all of the requirements 
of the applicable exception at the commencement of the financial relationship.^^ 
An entity may use this alternative method of compliance only once every three 
years with respect to the same referring physician. ^^ 

9. Claimants Bear Burden of Proof for Claims Denied Based on Prohibited 
Referrals. — CMS finalized its proposal to clarify existing Medicare regulations 
to provide that, 

in any appeal of a denial of payment for [DHS] that was made on the 
basis that the DHS was furnished pursuant to a prohibited referral [under 
Stark], the burden is on the [DHS] entity submitting the claim for 
payment to establish that the service was not furnished pursuant to a 
prohibited referral [under Stark]. ^^ 

In the Final Rule, CMS noted that this new regulation — section 
41 1.353(c)(2) — clarifies that "in any case in which a claim is denied for failure 
to comply with [Stark], the ultimate burden of proof (that is, the burden of 
persuasion) is on the claimant to demonstrate compliance and not on [CMS or its 

82. See id. 

83. Id. 

84. Id. 

85. Id. at 48,751 (to be codified at 42 C.F.R. § 41 1.353(g)). 

86. Id. (to be codified at 42 C.F.R. § 41 1.353(g)(l)(i)). 

87. Id. (to be codified at 42 C.F.R. § 41 1.353(g) (2)). 

88. Id. at 48,738 (to be codified at 42 C.F.R. § 41 1.353(c)(2)). 

1012 INDIANA LAW REVIEW [Vol. 42: 1003 

contractors] to demonstrate noncompliance."^^ In the preamble, CMS clarified 
that the burden of proof rules relate only to the administrative appeals of 
Medicare claims denials under the appeals process.^^ Appeals of civil monetary 
penalties, exclusions or other remedies imposed based on a determination that a 
DHS entity or a physician knowingly violated the Stark Law involve other appeal 
processes that are not subject to this rule.^^ 

10. Disclosure of Financial Relationships Report. — In the Final Rule, CMS 
also provided an update on the status of the ^'Disclosure of Financial 
Relationships Report" (DFRR).^^ The DFRR arose out of the Stark Law and its 
implementing regulations.^^ In September 2007, CMS intended to send a 
mandatory DFRR to 500 specialty and general hospitals for the purpose of 
collecting information to be used analyzing the investment, ownership, and 
compensation relationships with regard to the hospitals and its physicians.^"^ The 
mandatory disclosure process would have followed the previous year' s voluntary 
disclosure process, distributed to hospitals pursuant to the Deficit Reduction Act 
of 2006 (DRA).^^ However, prior to distribution of the mandatory DFRR, CMS 
was required to obtain approval from the Office of Management and Budget 
(OMB) and had been in discussions with OMB since late last year.^^ 

In the Final Rule, CMS indicated that it will proceed with its proposal to 
send the DFRR to 500 hospitals (both general acute care hospitals and specialty 
hospitals). ^^ 

However, based on further review and comments [that CMS] may 
receive in response to the revised [Paperwork Reduction Act (PRA)] 
package that will be published separately in the Federal Register [at 
some later date], [CMS] may decide to decrease (but not increase) the 
number of hospitals [to which it will] send the DFRR.^^ 

Importantly, CMS did not adopt a regular reporting or disclosure process at 
this time, and thus, the DFRR will be used, for the time being, as a "one-time 
collection effort."^^ CMS did, however, adopt its proposal that "the DFRR be 
completed, certified by the appropriate officer of the hospital, and received by 
[CMS] within [sixty] days of the date that appears on the cover letter or email 

89. /J. at 48,739. 

90. Id. 

91. Id.; see also 42 C.F.R. § 411.353(c) (2008). 

92. S'^^iV/. at 48,740-41. 

93. U at 48,740. 

94. Mat 48,740-41. 

95. Deficit Reduction Act of 2005, Pub. L. No. 109-171, 120 Stat. 4 (2006) (codified as 
amended in scattered titles and sections of U.S.C.). 

96. Changes to Disclosure of Physician Ownership in Hospitals and Physician Self-Referral 
Rules, 73 Fed. Reg. at 48,745. 

97. Mat 48,743. 

98. Id. 

99. M. at 48,744. 

2009] HEALTH CARE LAW 1013 

transmission of the DFRR."^^^ This is an increase from the original forty-five 
day required response time. 

Failure to respond to the DFRR could result in a civil monetary penalty. ^^^ 
However, prior to imposing such a penalty of up to $10,000 for each day beyond 
the timeframe established for a response, CMS agreed to issue a letter to any 
hospital that does not return the completed DFRR.^^^ The letter will inquire as 
to why the hospital did not timely return the completed DFRR.^^^ "In addition, 
a hospital may, upon a demonstration of good cause, receive an extension of time 
to submit the requested information." ^^"^ 

B. OIG Actions 

L Advisory Opinion 08-01. — On January 28, 2008, the U.S. Department of 
Health and Human Services, Office of Inspector General (OIG) issued Advisory 
Opinion 08-01.^^^ This was the first advisory opinion addressing the application 
of the anti-kickback statute to bulk replacement patient assistance programs 
(PAPs). Based on the specific facts of the arrangement, the OIG determined that 
while the arrangement raised a potential compliance risk as a possible 
inducement, it would still be approved due to the presence of several 
safeguards. ^^^ 

PAPs "have long provided important safety net assistance to patients of 
limited means who do not have insurance coverage for drugs, typically serving 
patients with chronic illnesses and high drug costs." '^^ The arrangement involved 
a non-profit, tax-exempt corporation (Partnership) that served "as a liaison 
between the pharmaceutical industry and free clinics and FQHCs [federally 
qualified health centers] to improve access to free pharmaceutical products for 
low-income persons" by participating in "various bulk replacement [PAPs] 
sponsored by pharmaceutical companies that provide in-kind donations in the 
form of free drugs."^^^ 

The Partnership sought to create an arrangement to make it easier for 
pharmaceutical companies to offer their bulk replacement PAPs to free clinics 
and FQHCs. ^^^ First, the Partnership limited utilization of the PAP drugs to 
uninsured patients with income below 200 percent of the federal poverty limit 

100. /J. at 48,741. 

101. Id. 

102. Id. 

103. Id. 

104. Id. 

105. OIG Advisory Opinion No. 08-01 (Jan. 28, 2008), available at http://www.oig.hhs. 
gov/fraud/docs/ advisoryopinions/2008/AdvOpn08-0 1 C.pdf 

106. Id. at 2, 12. 

107. OIG Special Advisory Bulletin on Patient Assistance Programs, 70 Fed. Reg. 70,623, 
70,623-24 (Nov. 22, 2005). 

108. OIG Advisory Opinion No. 08-01, supra note 104, at 2. 

109. Id. 

1014 INDIANA LAW REVIEW [Vol. 42: 1003 

(including Medicare beneficiaries who are not enrolled in Part D).^ ^^ Second, the 
Partnership imposed uniform PAP operating standards on participating 
companies, which included: (1) maintaining separate, auditable records for all 
PAP drugs; (2) maintaining systems for separating PAP inventory from other 
purchased products; (3) implementing a computerized dispensing system that will 
generate electronic reports for monitoring compliance with the Partnership 
requirements; and (4) agreeing to submit to annual on-site compliance audits.**^ 
Additionally, the arrangement prohibited the free clinics and FQHCs from 
"selling any donated PAP drugs and from transferring any PAP drugs to any third 
party other than the qualifying patients."^ '^ Finally, the arrangement required the 
Partnership to submit a monthly summary report to the pharmaceutical company 
sponsor of each participating PAP, "providing detailed information about the 
PAP drugs dispensed to eligible patients during the previous month."^*^ 

The OIG concluded that the arrangement could potentially violate both the 
anti-kickback statute and the prohibition on inducements to Medicare 
beneficiaries contained in the civil monetary penalties, but nevertheless, OIG 
approved the arrangement due to several safeguards. ^^"^ Specifically, OIG 
identified the following safeguards: (1) the inventory segregation of the free 
drugs to be provided protected against free clinics and FQHCs from receiving 
any remuneration such as excess stock that could be diverted to other uses;^^^ (2) 
the arrangement was documented in detail and was auditable, which assured 
transparency; ^^^ (3) the PAP sponsors did not control the selection of the free 
clinics or the FQHCs which prevented PAP sponsors from "cherry-picking" 
certain FQHCs to receive donated drugs; ^^^ (4) the physicians who prescribed 
drugs for FQHC patients did "not receive any compensation that [would] take[] 
into account in any manner the physicians' prescribing patterns for PAP 
sponsors' products, and the FQHCs [did] not track any physician's prescribing 
patterns of PAP drugs'';^ ^^ and (5) in its liaison capacity, the Partnership insulated 
the FQHCs from PAP sponsors.^^^ 

2. Advisory Opinions 07-21, 07-22, 08-09, & 08-21: The Gainsharing 
Exception. — In 2008, OIG issued four separate Advisory Opinions addressing 
several proposed arrangements involving gainsharing agreements. 

a. Advisory opinions 07-21 & 07-22. — On December 29, 2007, the U.S. 
Department of Health and Human Services issued Advisory Opinions 07-21^^^ 

110. /J. at 2-3. 

111. /^. at 3-4. 

112. Mat 3. 

113. Id. 

114. /J. at 12. 

115. Mat 10. 

116. Id. 

117. /J. at 10-11. 

118. /J. at 10. 

119. Id. at 11. 

1 20. OIG Advisory Opinion No. 07-2 1 (Dec. 28, 2007), available at 

2009] HEALTH CARE LAW 1015 

and 07-22,^^^ in which the OIG restated its position regarding gainsharing 
arrangements with respect to surgeons and anesthesiologists.^^^ In both 
arrangements, the hospitals engaged a third-party program administrator 
(Administrator) to collect and analyze data related to the proposed cost saving 
practices, and to manage the arrangement/^^ Both Administrators identified a 
number of specific cost-saving opportunities such as: (1) use as needed items; 
(2) product substitution; and (3) product standardization. ^^"^ 

The OIG noted its overall concerns related to gainsharing arrangements, 
included: (1) "stinting on patient care"; (2) "cherry picking" healthy patients; (3) 
payments in exchange for referrals; and (4) unfair competition. ^^^ 

The OIG determined that both arrangements contained a variety of 
safeguards so as to protect against inappropriate reductions in services, including: 

(1) "the specific cost-saving actions and resulting savings were clearly and 
separately identified"; (2) the hospitals provided "credible medical support for 
the position that implementation of the recommendations did not adversely affect 
patient care"; (3) the Administrator used "objective historical data and clinical 
measures"; and (4) the product standardization ensures "that individual 
physicians still had available the same selection of devices and supplies under the 
[a]rrangement as before." ^^^ Thus, the OIG concluded that neither arrangement 
violated the civil monetary penalties statute. ^^^ 

In addition, the OIG analyzed these arrangements under the anti-kickback 
statute. In that analysis, the OIG determined that the personal services safe 
harbor would not afford protection to the arrangements because the aggregate 
compensation was not set forth in advance. ^^^ Nevertheless, the OIG determined 
that it would not impose sanctions because: ( 1 ) the circumstances and safeguards 
reduced the likelihood that the arrangements would attract or increase referrals; 

(2) each group was the sole participant of their respective arrangement and each 
group was composed of their respective specialty; and (3) the activities required 

fraud/docs/advisoryopinions/2007/AdvOpn07-2 1 A.pdf. 

121. OIG Advisory Opinion No. 07-22 (Dec. 28, 2007), av^Z/aW^af 
fraud/docs/advisoryopinions/2007/ AdvOpn07-22A.pdf. 

122. See OIG Advisory Opinion No. 07-21 , supra note 1 19, at 1 1 ; OIG Advisory Opinion No. 
07-22, supra note 120, at 11. 

123. OIG Advisory Opinion No. 07-21, supra note 119, at 2-3; OIG Advisory Opinion No. 
07-22, supra note 120, at 2-3. 

124. OIG Advisory Opinion No. 07-21, supra note 1 19, at 4-5; OIG Advisory Opinion No. 
07-22, supra note 120, at 4. 

125. OIG Advisory Opinion No. 07-21 , supra note 1 19, at 8; OIG Advisory Opinion No. 07- 
22, supra note 120, at 7-8. 

1 26. OIG Advisory Opinion No. 07-2 1 , supra note 1 1 9, at 1 0- 1 1 ; OIG Advisory Opinion No. 
07-22, supra note 120, at 9-10. 

127. OIG Advisory Opinion No. 07-21, supra note 1 19, at 15; OIG Advisory Opinion No. 07- 
22, supra note 120, at 14. 

128. OIG Advisory Opinion No. 07-21 , supra note 1 19, at 13; OIG Advisory Opinion No. 07- 
22, supra note 120, at 12. 

1016 INDIANA LAW REVIEW [Vol. 42: 1003 

of the groups under the arrangements carried some increased Uability risks for 
physicians, for which compensation was reasonable. ^^^ Thus, the arrangements 
posed a low risk of fraud or abuse under the anti-kickback statute. 

b. Advisory opinion 08-09. — On July 31, 2008, the U.S. Department of 
Health and Human Services, OIG issued Advisory Opinion 08-09, in which the 
OIG again^^° discussed its position regarding gainsharing.^^^ This time, however, 
OIG discussed its position with respect to an arrangement under which "a 
medical center . . . agreed to share with groups of orthopedic surgeons and a 
group of neurosurgeons a percentage of the medical center's cost savings arising 
from the surgeons' implementation of a number of cost reduction measures in 
certain surgical procedures. "^^^ Specifically, the medical center would pay the 
surgeon groups fifty percent of the medical center's first-year cost savings 
directly attributable to specific changes in each of the surgeon groups' operating 
room practices for spine fusion surgery. ^^^ While the medical center withheld 
payment under the arrangement until it received a favorable opinion from the 
OIG, the OIG explicitly stated that such nonpayment does not insulate parties 
from liability. ^^"^ 

The medical center engaged an Administrator to collect and analyze 
historical data related to the cost-saving practices as well as to manage the 
arrangement. ^^^ The Administrator had thirty-six specific recommendations 
which can be grouped into two categories: ( 1 ) "use as needed biological" and (2) 
"product standardization."^^^ 

The OIG noted that these types of arrangements that share cost savings 
"could serve legitimate business and medical purposes" if properly structured by 
increasing "efficiency and reduc[ing] waste, thereby potentially increasing a 
hospital's profitability."*^^ However, the OIG reiterated its longstanding 
concerns related to gainsharing arrangements as aforementioned.*^^ 

129. OIG Advisory Opinion No. 01-21, supra note 1 19, at 13-14; OIG Advisory Opinion No. 
07-22, supra note 120, at 13-14. 

130. See also OIG Advisory Opinion No. 08-21 (Nov. 25, 2008), available at fraud/docs/advisoryopinions/2008/AdvOpn08-2 1 . 2.pdf. The OIG utilizing 
similar analysis reiterates its positions regarding gainsharing in the context of cardiac 
catheterization procedures. Id. at 12. Consistent with its prior gainsharing advisory opinions, the 
OIG found that the arrangement implicated both the civil monetary penalties statute and the anti- 
kickback statute. Id. at 16. However, the OIG concluded that it would not impose sanctions due 
to the presence of certain program safeguards. Id. 

131. Mat3n.4. 

132. Id. at I. 

133. Id. Sits. 

1 34. OIG Advisory Opinion No. 08-09 (July 3 1 , 2008), available at 
fraud/docs/advisoryopinions/2008/ AdvOpn08-09B.pdf. 

135. Id. at 3. 

136. Id. at 4. 

137. Mat 7. 

138. Id. at n. 

2009] HEALTH CARE LAW 1017 

The OIG ultimately concluded that the arrangement provided sufficient 
safeguards such as (1) the transparency of the identifiable cost-saving actions, (2) 
credible support that patient care was unaffected, and (3) the medical center and 
surgeons provided written disclosures of the arrangement to patients, which 
precluded the OIG from seeking sanctions. '^^ 

Additionally, the OIG analyzed the arrangement under the anti-kickback 
statute and determined that the personal services safe harbor would not protect 
the arrangement because the compensation was not set forth in advance/"^^ 
However, the OIG consistently concluded that sanctions would not be imposed 
because of several safeguards including (1) the low likelihood that referrals 
would increase as a result of the arrangement, (2) the low likelihood that the 
arrangement would influence other physicians who refer patients to the surgeon 
groups, and (3) the increased liability risks for the surgeons. ^"^^ The OIG 
continued to emphasize the transparency of this gainsharing arrangement, but still 
cautioned against similar arrangements, including multi-year arrangements or 
those based on generalized, less specific cost savings formulae. '"^^ 

m. Tax 

In 2007 and 2008, there were several tax developments that directly impacted 
the health care industry. These developments include the introduction of the new 
Form 990 by the Internal Revenue Service, final regulations relating to the 
requirements for tax exemption status under 501(c)(3) of the Internal Revenue 
Code, and an Interim Report on the Hospital Compliance Project. Below is a 
brief summary and analysis each of these recent tax developments. 

A. Final Form 990 

Since the summer of 2007, the world of tax exempt organizations, including 
tax exempt hospitals, has been intently focused on the changes associated with 
the redesign of the Form 990, Return of Organizations Exempt from Income Tax, 
by the Internal Revenue Service (IRS). After the closing of comment periods to 
drafts of the Form 990 and related instructions, the final version of the 
redesigned Form 990 (New Form 990) was released on December 20, 2007,^"^^ 
and instructions to the New Form 990 were released on August 19, 2008 
(Instructions). ^"^"^ 

The New Form 990 represents one of the most significant changes in the tax 
exempt sector during the last thirty years. "The focus of the redesign . . . was on 

139. /J. at 9-11. 

140. Id. at 12. 

141. Id. at 12-13. 

142. Id. at 12. 

143. I.R.S. News Release IR-2007-204 (Dec. 20, 2007). 

144. I.R.S. News Release IR-2008-98 (Aug. 19, 2008); see also I.R.S., Chronological History: 
Redesign of the 2008 Form 990 and Corresponding Instructions (June 18, 2009), available at„id=185892,00.html. 

1018 INDIANA LAW REVIEW [Vol. 42: 1003 

increasing reporting related to governance, executive compensation, related 
organizations, fundraising practices, and hospitals' amount of community 
benefit," according to Lois Lemer, IRS Exempt Organizations Division 
Director/"^^ The subject matter that is addressed in the New Form 990 was 
developed based on a perceived need to aid the tax compliance interests of the 
IRS as well as the transparency and accountability needs of the states, the general 
public, and local communities served by tax exempt organizations.^'*^ The New 
Form 990 becomes applicable for tax years beginning in 2008 (i.e., returns filed 
in 2009). The effective date for the filing of certain information on Schedule H 
(Hospitals) and Schedule K (Bonds) has been delayed for one year.^"*^ Only the 
portions of these Schedules that provide certain identifying information must be 
completed for the 2008 tax year.^'*^ 

The implementation of the New Form 990 represents an increased 
compliance burden for most tax-exempt organizations, especially tax exempt 
hospitals. The New Form 990 will require the disclosure of a significant amount 
of new information, which will be available publically.^'*^ The New Form 990 
consists of a core form (Core Form) and sixteen schedules (each referred to as 
a Schedule) that cover various topics. ^^^ Every organization that files the New 
Form 990 will complete the Core Form.^^^ Completion of the Schedules will be 
dependent upon the type of activities that the organization conducts. ^^^ While 
much has changed with the New Form 990, three areas should be of particular 
interest to tax exempt hospitals: governance, compensation, and hospital 
activities, including community benefit and charity care activities that must be 
reported on Schedule H.^^^ 

With respect to governance, a section of the Core Form is primarily devoted 
to questions about the governance of the organization that will likely influence 
the behavior of most tax-exempt organizations.*^^ The questions require only a 
"yes" or "no" answer, but in effect, these questions encourage organizations to 
revisit their structural and policy choices and modify their conduct. *^^ The 

1 45 . Christopher Quay & Fred Stokeld, IRS ' s Lemer Details Draft of Redesigned Form 990, 
57 Exempt Org. Tax Rev. 9 (2007). 

146. IRS Frequently Asked Questions, Why Did the IRS Redesign the Form? (Jan. 7, 2007), 

147. See TY 2008 Form 990 — Forms and Instructions, Instructions for Schedule H and 
Instructions for Schedule K (Jan. 5, 2009), available ^r„id= 

148. Id. 

149. See 26 U.S.C. § 6104(d)(1) (2006). 

150. I.R.S. News Release IR-2007-204 (Dec. 20, 2007). 

151. Id. 

152. Id. 

153. See id. 

154. See Instructions for Form 990, at 15-19, available at 

155. See generally id. 

2009] HEALTH CARE LAW 1019 

policies addressed include a conflict of interest policy, a whistleblower policy, 
and a document retention policy. ^^^ This portion of the form also inquires as to 
whether the organization's process for approving compensation arrangements 
satisfies the requirements for the rebuttable presumption of reasonableness.'^^ 

Significant with respect to the conflict of interest policy is the detail sought 
on conflicts enforcement practices, whether discovered before or after the 
transaction has occurred. This includes a description of the types of persons 
covered by the policy, the level at which the conflicts determination is made and 
at which actual conflicts are reviewed, as well as any restrictions imposed upon 
a person determined to have a conflict with respect to a particular transaction.'^^ 
While the IRS believes that the listed policies and procedures generally improve 
tax compliance, it noted that many of the policies or procedures are not legally 
required. '^^ If an organization does not already have the right policies or 
procedures in place with respect to these items (or similar ones discussed 
elsewhere on the New Form 990), then it may be prudent to adopt such policies. 

An organization also must disclose how it makes certain information about 
itself — including its Form 1023, Form 990, governing documents, and various 
other information — available to the public. '^^ Once again, the IRS is signaling 
that such information should be readily accessible and is inviting organizations 
to take action voluntarily rather than have the IRS compel them to do so. 

Compensation is addressed in two areas of the New Form 990 — in Part Vn 
of the Core Form and in Schedule J, Compensation. In Part Vn, organizations 
must report compensation for (1) current officers, directors, trustees, and key 
employees; (2) the five highest paid employees earning over $100,000; (3) 
former officers, key employees, and the five highest paid employees (going back 
five years) earning over $100,000; and (4) former directors or trustees who 
received more than $10,000 of reportable compensation.'^' A separate table 
demands compensation information for the highest-paid independent 

In Schedule J, compensation information must be supplied for ( 1 ) any person 
listed in Part Vn who receives reportable compensation greater than $150,000 
from the organization and any related organizations; (2) any former officer, key 
employee, or highest compensated employee receiving reportable compensation 
of $100,000 or more; (3) any former director or trustee receiving reportable 
compensation greater than $10,000; and (4) any individual who receives 
compensation from any source, other than the organization, for services rendered 

156. See id; see also 2008 Form 990: Return of Organization Exempt from Income Tax, 
0MB No. 1545-0047, at 6, //. 13-14, available at 
[hereinafter 2008 Form 990] (providing disclosures on Part VI of the return). 

157. 2008 Form 990, supra note 155, at 6, /. 15. 

158. Id. at 6,/. 12. 

159. Instructions for Form 990, supra note 153, at 15. 

160. 2008 Form 990, supra note 155, at 6, /. 19. 

161. /6?. at 7, /. la (listing the disclosures required under Part II). 

162. Id. at 8, § B, /. 1-2. 

1020 INDIANA LAW REVIEW [Vol. 42: 1003 

to the organization. ^^^ Schedule J also requires disclosures regarding specific 
types of compensation, some of which (e.g., first class travel or health club dues) 
the IRS has identified as occasionally problematic. ^^"^ An organization must 
provide details about the process for setting the compensation of the chief 
executive officer and, in some cases, other officers. ^^^ Finally, Schedule J 
requires information about deferred compensation and nontaxable fringe 

Schedule J, in combination with Part Vn of the Core Form, will require 
disclosure of a great deal of information not previously collected by the IRS. 
There is no transition relief concerning this Schedule, so organizations should 
already have systems in place to identify the various highly compensated 
individuals and to track and record the benefits they provide to them. 

Schedule H, Hospitals, should be of great interest to tax exempt hospitals 
even though the substantive questions on this schedule are optional for the 2008 
tax year,^^^ because it represents an entirely new compliance component for tax 
exempt hospitals. Schedule H must be completed by a filing organization that 
operates one or more hospitals. *^^ The Instructions provide that the term 
"hospital" is limited to state-licensed hospitals. ^^^ In the New Form 990, 
Schedule H is divided into the following six parts: Part I — Charity Care and 
Certain Other Community Benefits at Cost; Part 11 — Community Building 
Activities; Part III — Bad Debt, Medicare & Collection Practices; Part 
rv — Management Companies and Joint Ventures; Part V — Facility Information; 
and Part VI — Supplemental Information. ^^^ 

Part I of Schedule H requests information regarding charity care and certain 
other community benefits provided by the organization. ^^^ Part I raises numerous 
questions regarding the charitable care that the organization provides. *^^ The 
Schedule utilizes the community benefit reporting model advanced by Catholic 
Healthcare Association. Part I of Schedule H requires each line item of charity 
care/community benefit to include information regarding the number of the 
organization's charitable activities or programs related to that benefit, persons 

1 63. See 2008 Form 990, Schedule J: Compensation Information, available at http://www.irs. 
gov/pub/irs-pd^f990sj .pdf . 

164. See id. 

165. Id. 

166. Id. 

167. See 2008 Form 990: Instructions for Schedule H, at 1 , available at 
pub/irs-pdf/i990sh.pdf. Only one part of the form that identifies hospital facilities will need to be 
completed when organizations file their returns in 2009. Id. (noting that only Part V must be 

168. See id. 

169. /J. at 1. 

170. Mat 2-7. 

171. See id. at 2. 

172. See 2008 Form 990, Schedule H: Hospitals, available at 
pdf/f990sh.pdf [hereinafter 2008 Form 1990, Schedule H]. 

2009] HEALTH CARE LAW 102 1 

served, total community benefit expense, direct offsetting revenue, net 
community benefit expense, and the percent of total expenses represented by 
such benefit. ^^^ The IRS has decided with the New Form 990 that Medicare 
shortfalls and bad debt should not be included in the calculation of community 
benefit — although such matters still may be reported in another area of the 
form.^^"^ According to the instructions to Part I, a hospital is required to use the 
"most accurate costing methodology" in reporting various costs on Schedule H. ^^^ 
Part II of Schedule H, allows an organization to describe its community 
building activities. ^^^ Examples of such activities include physical improvements 
and housing, economic development, community support, and environmental 
improvements. ^^^ Part HI allows an organization to provide information about its 
bad debt and Medicare shortfalls. ^^^ The schedule also seeks information 
regarding collection practices. *^^ Part FV of Schedule H requires that an 
organization identify and describe all management companies and joint ventures 
(regardless of their tax structure as partnerships or corporations) which it owns 
together with any of its officers, directors, trustees, key employees, or 
physicians. ^^^ In Part V of Schedule H, the IRS requests general information 
regarding the different facilities at which the organization provides medical or 
hospital care, including the activities and programs conducted at each such 
facility. ^^^ This is the only Part of this Schedule that organizations will be 
required to complete for 2008.'^^ Part VI of Schedule H seeks certain 
supplemental information regarding the organization, such as how the 
organization assesses the health care needs of the communities it serves and how 
the organization informs and educates patients about their eligibility for 
assistance under federal, state, or local government programs or under the 
organization's charity care policy. ^^^ Part VI also seeks any other information 
important to describing how the organization's hospital facilities further its 

1 QA 

exempt purposes. 

Schedule H demands more information from hospitals than ever before, and 
it is probable that reform advocates, members of Congress, and others will point 
to such information to support proposed changes to the tax-exempt healthcare 
sector. Overall, the New Form 990 presents a much more logical and systematic 
approach to the information reporting for tax exempt organizations. However, 

173. See 2008 Form 990, Schedule H, supra note 171, at 1. 

174. 2008 Form 990: Instructions for Schedule H, supra note 166, at 2. 

175. Id. at 3. 

176. Id. 

Ml. See id. at 3-4. 

178. Mat 4. 

179. Id. at 5 (discussing Section C of Part III). 

180. /J. at 5-6. 

181. See id. at 6. 

182. Mat 1,6. 

183. Id. at 6-1. 

184. Id. at 7 (discussing line 7). 

1022 INDIANA LAW REVIEW [Vol. 42: 1003 

the volume of new information that must be produced by tax exempt 
organizations will undoubtedly be burdensome. Most significantly, tax exempt 
hospitals will need to evaluate their policies and operations to ensure that they 
can provide information on the New Form 990 that represents them in a favorable 

B. Interaction Between Tax Exempt Status and Rules Regarding 
Excess Benefit Transactions 

On March 28, 2008, the IRS released final regulations that clarify the 
substantive requirements for tax exemption under section 501(c)(3) of the 
Internal Revenue Code of 1986, as amended (Code), explain the relationship 
between those requirements and the imposition of excise taxes under Code 
section 4958, better known as the Intermediate Sanctions Law, and provide 
several examples of the interaction between Code sections 501(c)(3) and 4958.^^^ 

For background purposes, the Intermediate Sanctions Law imposes excise 
taxes on ^'excess benefit transactions. "^^^ An excess benefit transaction occurs 
when a tax exempt organization provides a benefit to a ''disqualified person" that 
exceeds the fair market value of the consideration received for such benefit. ^^^ 
A disqualified person is "any person who was, at any time during the [five-year] 
period ending on the date of such transaction, in a position to exercise substantial 
influence over the affairs of the [tax exempt] organization," any close family 
member of such individual, and any entity in which any such individual owns 
more than a thirty-five percent interest. ^^^ 

The IRS had previously issued proposed regulations addressing this topic on 
September 9, 2005.^^^ The release of these regulations finalize the IRS's 
application of certain factors when determining whether an exempt 501(c)(3) 
organization that has engaged in an excess benefit transaction should also lose 
its exempt status. ^^^ Specifically, the IRS will consider the following facts and 

(A) the size and scope of the [exempt] organization's regular and 
ongoing activities that further exempt purposes before and after the 
excess benefit transaction or transactions occurred; 

(B) the size and scope of the excess benefit transaction or transactions 
(collectively, if more than one) in relation to the size and scope of the 
[exempt] organization's regular and ongoing activities that further 
exempt purposes; 

185. See Treas. Reg. §§ 1.501(c)(3)-l, 53.4958-2 (as amended by T.D. 9390, 2008-18 1.R.B. 

186. See 26 U.S.C. § 4958(c) (2006). 

187. Id. § 4958(c)(1). 

188. Id. § 4958(f)(1). 

189. See T.D. 9390, 2008-18 I.R.B. 855 (2008). 

190. Id. 

2009] HEALTH CARE LAW 1023 

(C) whether the [exempt] organization has been involved in multiple 
excess benefit transactions with one or more person; 

(D) whether the [exempt] organization has implemented safeguards that 
are reasonably calculated to prevent excess benefit transactions; and 

(E) whether the excess benefit transaction has been corrected ... or the 
[exempt] organization has made good faith efforts to seek correction 
from the disqualified person(s) who benefited from the excess benefit 
transaction. ^^^ 

All of the foregoing factors will be "considered in combination with each other," 
and the IRS "may assign greater or less weight to some factors than to others." '^^ 
The finalization of these regulations should serve to re-emphasize the 
importance to tax exempt organizations of having appropriate safeguards against 
excess benefit transactions and private inurement. Such safeguards should 
include an effective Intermediate Sanctions Policy to identify and prevent or 
correct the occurrence of excess benefit transactions. 

C IRS Interim Report on Hospital Compliance Project 

On July 19, 2007, the IRS released an Interim Report on Tax Exempt 
Hospitals and Community Benefit Projects (IRS Interim Report) that summarized 
the responses from tax exempt hospitals to a questionnaire distributed by the IRS 
in May 2006.^^^ That questionnaire was sent to over 500 tax exempt hospitals 
across the country, and it requested information regarding hospitals' activities, 
governance, expenditures, and executive compensation practices. ^^"^ The IRS 
Interim Report presents data gathered from the responses of 487 hospitals and 
focuses on how those hospitals provide and report benefits to the community 
pursuant to the community benefit standard. ^^^ 

The IRS Interim Report made three basic findings: (1) nearly all hospitals 
reported providing various types of community benefit; (2) no uniform definition 
of uncompensated/charity care emerged from various hospital responses; and (3) 
"there appear to be significant differences in the way other components of 
community benefit are reported."^^^ In conjunction with the IRS Interim Report, 
the IRS's hospital project team recommended developing a separate Form 990 
schedule for hospitals as a vehicle for addressing the lack of definitional and 

191. Treas. Reg. § 1.501(c)(3)(ii) (as amended by T.D. 9390, 2008-18 I.R.B. 855). 

192. Id. § 1. 503(c)(3)- l(f)(2)(iii). 

193. For a copy of the IRS Interim Report, see I.R.S., Hospital Compliance Project: 
Interim Report (Summary of Reported Data) (2008), available «r 

194. See generally id. 

195. Id. all. 

196. I.R.S. News Release IR-2007-132 (July 19, 2007). 

1024 INDIANA LAW REVIEW [Vol. 42: 1003 

reporting uniformity. '^^ The IRS responded with the new Schedule H, Hospitals, 
as part of the New Form 990, which was clearly influenced by the preliminary 
results of the IRS Interim Report. 

The IRS issued a final report on the community benefit compliance check in 
early 2009.'^^ The final report is outside the scope of this Survey, but it includes 
a more in-depth analysis of the responses, including information regarding 
executive compensation practices, and it provides information based on varying 
demographics, such as rural and urban communities and hospitals. ^^^ 

IV. Reimbursement & Payment Issues 

A. New Provider Reimbursement Review Board Instructions 

On August 8, 2008, the Provider Reimbursement Review Board (Board) 
provided guidance following the much anticipated changes to the Medicare 
appeals process by issuing new rules, also referred to as instructions, to comply 
with new Centers for Medicare and Medicaid (CMS) regulations. ^^^ The 
instructions outline new requirements under the regulations published by CMS 
in the Federal Register on May 23, 2008.^^' The new instructions supersede the 
prior rules and are applicable to all appeals pending as of, or filed on or after, 
August 21, 2008.^^^ The Board instructions present additional issues providers 
must consider when preserving their appeal right before the Board. A brief 
summary and discussion of the changes to the appeal filing and pre -hearing 
process affected under the new instructions are discussed below. 

1. Appeal Filing Changes. — Under the new rules the Board has issued 
several changes that appear minor in nature but can significantly impact whether 
the Board will grant jurisdiction to an appeal or whether the Board will consider 
a document to be timely received. One of the most significant changes was made 
to the actual Board filing process with respect to date and time of receipt. In 
order to be deemed timely filed, the previous rules allowed an appeal or 
document to be accepted by the Board based on the day of mailing. Under the 
new instructions, the filing deadline is now the date of receipt.^^^ This change 

197. Id. 

198. For a copy of the final report, see I.R.S. IRS EXEMPT ORGANIZATIONS (TE/GE) Hospital 
Compliance Project: Final Report (2009), available at 
tege/frepthospproj .pdf . 

199. See generally id. 

200. Provider Reimbursement Review Bd., Ctrs. for Medicare & Medicaid Servs., 
Provider Reimbursement Review Board Rules (2008), available at 

201 . See Provider Reimbursement Determinations and Appeals, 73 Fed. Reg. 30, 1 90 (May 23, 
2008) (to be codified at 42 C.F.R. pts. 405, 413, 417). CMS published this Final Rule which 
outlines the changes to the Provider Reimbursement Review Board appeal process. Id. 

202. Provider Reimbursement Review Bd., supra note 200, at 1 . 

203 . See Provider Reimbursement Determinations and Appeals, 73 Fed. Reg. at 30, 1 92 (to be 

2009] HEALTH CARE LAW 1025 

is significant as it now places a stricter timeline on filing appeals and other time- 
sensitive documents to the Board. The effects of the changes are as follows. If 
an over-night carrier is used for delivery, the date of receipt will be the date as 
recorded by the carrier.^^"^ If the U.S. Postal Service is used for delivery, the date 
of receipt is the date the Board's receiving entity enters the filing as 

The new rules also place additional limitations on providers with respect to 
adding new appeal issues to active appeals already timely filed. Under the 
previous rules, providers had significant leeway to add new appeals issues at any 
time prior to the Board hearing. The new instructions change this filing deadline 
dramatically. Now, if a provider wishes to add a new appeal issue, they must do 
so within sixty days of the initial 180-day filing deadline.^^^ This change now 
gives providers a maximum of 240 days to add new issues to individual appeals. 
The Board's rationale for this change was based on the growing backlog of cases 
and concern that providers were intentionally leaving appeals open longer with 
the hope of capturing new appeal issues to add to the original filing.^^^ The new 
instructions significantly limit the addition of issues and now require providers 
to carefully consider the entirety of potential issues that arise from a final 
determination as part of their filing strategy. 

Other appeal filing considerations relate to certain certifications that must be 
provided to the Board. In the Board instructions, the Board provides several 
templates that define specific information and specific statements that must be 
certified to the Board for either an individual provider or group appeal.^^^ The 
new instructions require that the designated representative sign a certification to 
the Board that the issue requested for appeal is not currently under appeal and 
that there is no common issue related provider (CIRP) issue.^^^ Under the CIRP 
rule, if two or more providers have a common appeal issue — are commonly 
owned or controlled and have the minimum $50,000 amount in controversy 
requirement — the providers must file their appeal as a CIRP group.^^^ While the 

codified at 42 C.F.R. § 405. 1801(a), (d)); see also Provider REIMBURSEMENT Review Bd., supra 
note 200, at 2. 

204. Provider Reimbursement Determinations and Appeals, 73 Fed. Reg. at 30,192. 

205. Id. 

206. Id. For each fiscal year, providers must submit a cost report to a Medicare Administrative 
Contractor (formerly referred to as a fiscal intermediary) who is responsible for auditing all costs 
submitted for payment to CMS. Id. at 30,191. After the audit is completed each provider is given 
a notice of program reimbursement (NPR) by their respective MAC which, among other things, 
outlines any adjustments to payments — often citing overpayments made to the provider. See id. 
If, after reviewing the NPR and adjustments, the provider wishes to appeal the issue, they have 1 80 
days from the receipt of the NPR from which to initiate the appeal or they generally lose their 
appeal rights for the cost report year. See id. at 30,191, 30,203. 

207. /J. at 30,192. 

208. See PROVIDER REIMBURSEMENT REVIEW Bd., supra note 200, at 45-62. 

209. Id. at 58. 

210. Id. at 9. Under the Board instructions, in order to initiate an individual appeal, a provider 

1026 INDIANA LAW REVIEW [Vol. 42: 1003 

CIRP rule has not changed in its scope under the new instructions, the Medicare 
Administrative Contractors (MAC) (formerly fiscal intermediaries) have noted 
they intend to deny jurisdiction for an appeal to the Board if the CIRP rule is not 

Finally, the Board instructions now require a more comprehensive 
description of the issue under appeal along with supporting documentation.^^ ^ 
The Board will no longer accept a general statement of an issue when requesting 
a hearing. Providers, in their initial hearing request, must provide the following 
information: (1) proof that all jurisdictional requirements have been met; (2) a 
thorough explanation of the issue under appeal; (3) the rationale for the appeal 
and underlying assertion as to why the provider believes the Medicare payment 
is incorrect — including supporting documentation or the provider' s notation of 
the lack of necessary documentation required to accept the final payment 
determination; (4) an explanation as to how the determination should be 
determined differently; and (5) for items properly self-disallowed, a full 
descriptions of the nature of the controversy, the amount of reimbursement 
sought, and for cost reporting periods ending on or after December 31, 2008, 
proof that the self-disallowed item was filed under protest in the provider's cost 

2. Pre-hearing Considerations. — Under the new instructions, the Board has 
introduced a significant change with the addition of the Joint Scheduling Order 
(JSO) which has implications for the appeals pre-hearing procedure.^ ^^ In the 
past, the Board established all preliminary and final position paper due dates in 
addition to overseeing the pre-hearing process between the provider and MAC 
based on standard timeframes and the appeal filing date.^^"^ The Board is now 
offering two options for providers with respect to the pre-hearing process: (1) 
the Board will establish a standard timeline for document filing or (2) the parties 
may now jointly establish the pre-hearing deadlines in a proposed JSO.^^^ The 
Board believes the JSO option will promote parties to work together to resolve 
issues more quickly, allow for stipulations, and promote judicial economy. 

The JSO now allows parties to negotiate a detailed pre-hearing timeline 
setting out agreed upon dates for such important items as the filing of position 

must have at least $10,000 in controversy. Id. at 5. For a group appeal, the amount in controversy 
must be $50,000. Id. at 8. 

211. Provider Reimbursement Review Bd., supra note 200, at 4. 

212. Id. at 6, 46-63. A provider may self-disallow an item for payment on their cost report 
when they believe an item should be reimbursed but also are concerned that by requesting the 
payment from CMS, they would be in violation of a regulation or other legal authority. Id. at 6. 
If the provider maintains there should be a payment, however, they must file the cost report to CMS 
under protest. Id.\ see also 42 C.F.R. § 405.1835(a)(l)(ii) (2006) (outlining the filing of a cost 
report under protest). 

213. Provider Reimbursement Review Bd., supra note 200, at 17-20; see also 42 C.F.R. 

214. Provider Reimbursement Bd., supra note 200, at 17. 

215. Id. 

2009] HEALTH CARE LAW 1027 

papers and the exchange of information.^ ^^ Under the JSO, the Board will still 
maintain authority over setting the final position paper due dates and scheduling 
the date of the hearing.^^^ As part of the JSO request, the parties must identify 
all issues they agree to, conditionally agree to, and any issues that remain in 
dispute.^^^ Providers must also provide the Board with expected discovery 
requests and a timeline for the exchange of information.^ ^^ When approved, the 
JSO becomes the timeline that the Board will follow with respect to the pre- 
hearing procedure. If a provider or MAC fails to follow the negotiated JSO, they 
jeopardize their appeal rights before the Board. 

B. Recovery Audit Contractors 

The Recovery Audit Contractor (RAC) Program was instituted by CMS 
under authorization from the Medicare Modernization Act of 2003^^° and was 
made permanent under the Tax Relief and Health Care Act of 2006.^^^ Recovery 
Audit Contractors are independent organizations that contract with the federal 
government to audit improper over- and under-payments made to providers 
through the Medicare program.^^^ Congress implemented the RAC Program as 
a means to support CMS in its efforts to prevent improper payments and 
safeguard against increased costs.^^^ Li 2007, 0MB estimated that, of the 1.2 
billion claims processed by CMS for that year, improper payments accounted for 
Medicare costs of $10.8 billion.^^'* The program was initiated under a three-year 
demonstration project beginning in 2005 that was first piloted in California, New 
York, and Florida and was eventually implemented in Arizona, Massachusetts, 
and South Carolina.^^^ An overview of the RAC Demonstration Project and 
implications for the final RAC Program is discussed below. 

7. RAC Demonstration Project, 2005-2008. — The RAC Demonstration 
Project began in 2005 and ended on March 27, 2008.^^^ The Program was 
specifically designed to identify and correct past improper CMS payments and 
provide information to CMS regarding claims error rates that could be used to 

216. Id. at 17-20. 

217. Mat 20. 

218. Mat 19-20. 

219. Id. at 19. 

220. Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 
108-173, § 306, 117 Stat. 2066, 2256-57. 

221. Tax Relief and Health Care Act of 2006 § 302, 42 U.S.C. § 1395ddd (2006). 

222. See id. 

223. See id. § 1395ddd(a). 

224. Ctrs. for Medicare aisfd Medicaid, The Medicare Recovery Audit Contractor 
(RAC) Program: An Evaluation of the 3-Year Demonstration 1 (2008), available at [hereinafter RAC 

225. Id. 

226. Id. at 6. 

1028 INDIANA LAW REVIEW [Vol. 42: 1003 

prevent future improper payments. ^^^ Through a competitive bidding process, 
three contractors were invited to participate in the RAC Demonstration Project 
and were divided among the piloted states.^^^ The RACs were paid by what has 
proven to be a controversial method of payment. While most agencies working 
with CMS are paid through appropriated funds, RACs were paid based on a 
contingency fee.^^^ That is, they were paid a percentage based on the number of 
improper claims the RACs identified and collected. 

Results of the RAC Demonstration paint an interesting picture of what will 
likely occur once the RAC Program is implemented nationally in 2010.^^^ Upon 
completion of the demonstration on March 27, 2008, the RAC auditors had 
identified over $1.03 billion in improper payments — ninety-six percent ($992.7 
million) were recovered overpayments made to providers while only four percent 
($37.8 million) were repaid to providers for underpayment.^^ ^ With respect to 
hospital claims, critical areas that were examined included medical necessity and 
documentation related to proper coding. ^^^ Of the hospital overpayment claims 
reviewed, forty-one percent of all improper claims were due to a medically 
unnecessary setting, thirty-six percent were due to incorrectly coded claims, and 
eight percent were due to insufficient documentation.^^^ 

After the RAC Demonstration project was completed, CMS implemented 
new guidelines that will become effective with the final program.^^"^ Key changes 
include: ( 1 ) RACs can only review claims going back to October 1 , 2007; (2) all 
RACs must have a medical director; (3) RACs must have all issues they intend 
to examine approved by CMS and then must comply with the standards set forth 
by CMS; (4) RACs must post the issues on their website for providers to review; 

(5) RACs will only be able to request medical records based on a provider's NPI 
number for inpatient hospitals the RACs can only obtain ten percent of average 
monthly Medicare claims (maximum of 200 records) every forty-five days; and 

(6) RACs cannot review any claim or issue now under investigation or previously 
reviewed by the OIG.^^^ 

2. The Implications of the Permanent RAC Program. — After the RAC 

227. Id.dXn. 

228. Id. During the RAC Demonstration, Connolly was the RAC for New York and 
Massachusetts, HealthDatalnsights was the RAC for Florida and South Carolina and PRG-Schultz 
was the RAC for California and Arizona. Id. 

229. Id. 

230. The national implementation is contemplated by the Medicare Modernization Act of 
2003. See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 
108-173, § 306, 117 Stat. 2066, 2256-57. 

23 1 . RAC Program, supra note 227, at 2. 

232. Id. at 56, app. E. 

233. Id. at 18-19. 

234. See id. at 25, tbl. 10. 

235. Id.\ see also Ctrs. for Medicare and Medicaid, RAC Medical Record Request 
Limits (2009), available at 
Record%20Request% 20Limits.pdf. 

2009] HEALTH CARE LAW 1029 

Program was halted due to a bidding dispute in November 2008, CMS announced 
on February 6, 2009, that the final RAC contractors were named.^^^ Under the 
permanent RAC Program the country has been divided into four regions. ^^^ The 
following RACs will be paid and are as follows: (1) in Region A, Diversified 
Collection Services will be the RAC and will be paid a contingency fee of 
12.45%; (2) in Region B, CGI Technologies and Solutions will be the RAC and 
will be paid a fee of 12.50%; (3) in Region C, Connolly Consulting Associates 
will be the RAC and will be paid a fee of 9.00%; and (4) in Region D 
HealthDatalnsights will be the RAC and will be paid 9.49%.^^^ The permanent 
RAC Program began in March 2009 in some areas of the country and will be 
nationally ramped up through 2010. 

Hospitals and providers throughout the country are in various stages of trying 
to become RAC-ready . Hospitals have been encouraged to develop a centralized, 
multi-disciplinary group of healthcare providers and staff who can quickly 
respond to a RAC inquiry.^^^ Although providers in demonstration states have 
provided insight into how to prepare for a RAC data request, the demonstration 
project made it clear that providers should understand their rights and obligations 
and how to properly and quickly respond to a RAC inquiry.^"^^ To begin, 
providers should know that RACs audit payment claims by one of two methods: 
(1) by mining claims data provided by to them by CMS and/or (2) by reviewing 
a sampling of patient charts delivered by the providers to the RAC upon request. 
If a provider receives a records request, hospitals have forty-five days to 
respond.^"^' Hospitals can request an extension, but must do so before day forty- 
five.^"^^ Providers who fail to respond in a timely manner will have their claims 
denied. RACs have sixty days to review records and within the sixty day period 
must notify providers of the final determination by letter. 

Preserving appeal rights as the result of the RAC audit is another important 

236. See Andrea Kraynak, RAC Protest Resolved: CMS to Continue RAC Program 
Implementation, HealthLeadersMedia.COM, Feb. 9, 2009, n.p., http://www.healthleadersmedia. 

237. For a map of these jurisdictions, see Ctrs. for Medicare and Medicaid Servs., Proposed 
2008 RAC Jurisdictions, http://www.cms. 
20Jurisdictions.pdf (last visited July 6, 2009). 

238. FedBizOpps.Gov, Recovery Audit Contractor (RAC), 
ck=l&au=&ck= (last visited July 6, 2009). 

239. See, e.g.. Bill Phillips et al., 10 Critical Actions to Minimize RAC Recoupment, 
HealthLeadersMedia.COM, Feb. 23, 2009, n.p., 

240. See RAC PROGRAM, supra note 227, at 29. 

241 . Ctrs. for Medicare and Medicaid Servs., Frequently Asked Questions, "How Long Does 
a Provider Have to Submit Medical Records When Requested by a Recovery Audit Contractor 
(RAC)?," (search for question number 7725). 

242. Id. 

1030 INDIANA LAW REVIEW [Vol. 42: 1003 

consideration. If hospitals are engaged in a RAC review, it is crucial to follow 
an established timehne to help navigate the required procedural obligations. An 
abbreviated version of the appeals process with important times is outlined 

Pre- Appeal : Providers should notify the RAC as soon as it has verified there 

is a dispute with the RAC's determination of an overpayment issue; 

Level 1 Review : Appeal to the FI/MAC for redetermination, Provider must 

file within 120 days of receiving the initial RAC determination letter 

requesting repayment; the MAC/FI has sixty days to issue determination 

after the request is made; 

Level 2 Review : Provider has 1 80 days from the FI/MAC redetermination 

to file an appeal with a Qualified Independent Contractor (QIC); the QIC has 

sixty days to issue a determination after the request is made; 

Level 3 Review : If denied by the QIC, the provider must file an appeal 

within sixty days to an Administrative Law Judge (ALJ). The ALJ has 

ninety days to issue a ruling; 

Level 4 Review : If denied by the ALJ, the provider must appeal within sixty 

days to the Medicare Appeals Council for review. The Appeals Council has 

ninety days to issue a determination; 

Level 5 Review : If denied by the Appeals Council, then the provider must 

move within sixty days for judicial review in a United States District 


V. Quality 

Two extremely important developments which relate to quality of health care 
include the new Red Flag Regulations as well as a final rule regarding the 
recognition of new Hospital Acquired Conditions. These developments require 
providers to be more diligent in the way they deliver care. 

A. Red Flag Regulations 

On December 4, 2003, President Bush signed the Fair and Accurate Credit 
Transactions Act (FACTA). ^"^"^ FACTA was originally enacted to provide greater 
protection against consumer identity theft and directed six federal agencies to 
develop methods of detecting consumer identity theft.^"^^ These six agencies 

243. See Ctrs. for Medicare and Medicaid Servs., Original Medicare (Parts A and B Fee-For- 
Service) Appeals Process, 
AppealsprocessflowchartAB.pdf (last visited July 6, 2009). 

244. See Fair and Accurate Credit Transactions Act of 2003, Pub. L. No. 108-159, 117 Stat. 
1952, 2012. 

245. See 15 U.S.C. § 1681m(e)(l)(A) & (2)(A) (2006). The six agencies Congress directed 
to develop guidelines were: ( 1 ) the Office of the Comptroller of the Currency, Treasury; (2) the 
Board of Governors of the Federal Reserve System; (3) the Federal Deposit Insurance Corporation; 
(4) the Office of Thrift Supervision, Treasury; (5) the National Credit Union Administration; and 
(6) the Federal Trade Commission. Id. § 1681m(2)(l) (listing the first three under the general 

2009] HEALTH CARE LAW 103 1 

jointly promulgated final regulations that were initially to become effective 
November 1, 2008, but were later delayed and are presently effective as of May 
1, 2009 (Red Flag Rules). ^"^^ The Red Flag Rules impose obligations on many 
health care providers to establish programs and greater oversight to prevent 
consumer identify theft. 

The Red Flag Rules require "each financial institution or creditor to develop 
and implement a written Identity Theft Prevention Program (Program) to detect, 
prevent, and mitigate identity theft in connection with the opening of certain 
accounts or certain existing accounts. "^"^^ The Rules define Red Flags as "a 
pattern, practice, or specific activity that indicates the possible existence of 
identify theft," which the aforementioned program should protect against.^"^^ 
They also provide guidelines "to assist financial institutions and creditors in the 
formulation and maintenance of [such] a Program that satisfies the requirements 
of the [rules]. "^"^^ Key definitions of the Red Flag Rules bring some health care 
entities within the rules' purview. The Rules define "creditor" as "any [entity] 
who regularly extends, renews, or continues credits; any [entity] who regularly 
arranges for the extension, renewal, or continuation of credit; or any assignee of 
an original creditor who participates in the decision to extend, renew, or continue 
credit."^^^ "Credit" is defined as "the right granted by a creditor to a debtor to 
defer payment of debt or to incur debts and defer its payment or to purchase 
property or services and defer payment therefore."^^^ Finally, "covered account" 
is defined as: 

(i) An account that a financial institution or creditor offers or maintains, 
primarily for personal, family, or household purposes, that involves or 
is designed to permit multiple payments or transactions, such as a credit 
card account, mortgage loan, automobile loan, margin account, cell 
phone account, utility account, checking account, or savings account; 

(ii) Any other account that the financial institution or creditor offers or 
maintains for which there is a reasonably foreseeable risk to customers 
or to the safety and soundness of the financial institution or creditor from 
identity theft, including financial, operational, compliance, reputation, 
or litigation risks.^^^ 

heading of "Federal banking agencies"). 

246. Fed. Trade CoMM'N, FTC Enforcement Poucy: Identity Theft Red Flags Rule, 
1 6 CFR 681.2 (2008), available at 1 0/08 1 022idtheftredflagsmle.pdf. 

247. Identity Theft Red Flags and Address Discrepancies Under the Fair and Accurate Credit 
Transactions Act of 2003, 72 Fed. Reg. 63,718, 63,718 (Nov. 9, 2007). 

248. 16 C.F.R.§ 681.1(b)(9) (2009). 

249. /J. pt. 681,app. A. 

250. Id. § 681.1(b)(5) (citing 15 U.S.C. § 1681a(r)(5) (2006)). 

251. Id. § 681.1(b)(4) (citing 15 U.S.C. § 1681a(r)(5) (2006)). 

252. Id. § 681.1(b)(3). 

1032 INDIANA LAW REVIEW [Vol. 42: 1003 

In context, the definition of covered account implies a continuing 
relationship where a consumer receives a service or product that is billed 
retroactively. The widespread practice among health care institutions to bill for 
services after those services have been provided and the maintenance of accounts 
that allow for patients to defer and make multiple payments for these services 
will likely allow the FTC to characterize health care institutions who maintain 
these practices as "creditors" who extend "credit" under the Red Flag Rules. 
Moreover, the FTC may characterize patient accounts as "covered accounts," as 
patient accounts are generally accounts maintained for personal and/or family 
purposes (e.g., health care needs) that are designed to allow multiple payments. 
Such characterizations will likely trigger the application of the Red Flag Rules 
to these health care institutions. Moreover, while there has been some 
speculation as to whether the FTC has jurisdiction over non-profit entities, 
including nonprofit hospitals, the FTC has taken the position that it will enforce 
the Red Flag Rules against nonprofit entities.^^^ 

Health care entities that determine they are covered by the Rules, finding 
they (1) are creditors and (2) have covered accounts, must follow the Red Flag 
Rules by implementing a Program. Each entity must tailor its Program to protect 
against the risk of identity theft based on its own operations and circumstances. ^^"^ 
For example, health care institutions covered by the rules would likely develop 
a Program to address medical identity theft. ^^^ However, each Program 

must contain reasonable policies and procedures to: 

(i) Identify relevant Red Flags for covered accounts that the . . . 
[c]reditor officer or maintains, and incorporate those Red Flags into its 

(ii) Detect Red Flags that have been incorporated into the Program of . 
. . the [c]reditor; 

(iii) Respond appropriately to any Red Flags that are detected ... to 
prevent and mitigate identity theft; and 

(iv) Ensure the Program (including the Red Flags determined to be 
relevant) is updated periodically, to reflect changes in risks to customers 
and to the safety and soundness of the . . . creditor from identity theft.^^^ 

Health care entities implementing an initial Program, addressing all of the 

253. Fed. Trade Comm'n, New "Red Flag" Requirements for Financial Institutions and 
Creditors Will Help Fight Identity Theft (June 2008), available Air 

254. 16 C.F.R. § 681.1(d)(1) (2009). 

255. Identity Theft Red Flags and Address Discrepancies Under the Fair and Accurate Credit 
Transactions Act of 2003, 72 Fed. Reg. 63718, 63727 (Nov. 1, 2007). 

256. 16 C.F.R. § 681.1(d)(2) (2009). 

2009] HEALTH CARE LAW 1033 

elements listed above, must receive the approval of the entities' "board of 
directors or an appropriate committee"; therefore, the Program and the board of 
directors, committee or "a designated employee at the level of senior 
management [i.e. compliance officer, risk manager or general counsel]" should 
be involved "in the oversight, development, implementation and administration 
of the Program."^^^ The entities must also train appropriate staff to implement 
the Program and ensure adequate oversight of its arrangements with service 

The Red Flag Rules Program and oversight requirements will place 
additional obligations on many health care providers to develop additional 
policies and procedures to monitor patient accounts for identity theft. Moreover, 
the rules require more activity, involvement and accountability from governing 
boards of health care providers in regards to identify theft. Finally, health care 
providers must monitor their relationships with third parties that provide services 
to the health care providers and with whom these providers exchange patient 
account information. Many health care providers may already have in place 
certain provisions of agreements with third party services providers to protect 
certain patient information to comply with security and privacy obligations under 
the Health Insurance Portability and Accountability Act (HDPAA) and regulations 
that have been promulgated thereto. However, health care providers will have 
to impose additional oversight mechanisms and impositions on these third party 
service providers to protect against identity theft as required by the rules. 

B. Hospital Acquired Conditions 

On August 19, 2008, the Centers for Medicare & Medicaid Services (CMS) 
issued a final rule regarding additional recognized Hospital Acquired Conditions 
(HACs) and reportable quality measures. ^^^ The effective date of the final rule 
is October 1, 2008.^^^ The final rule implements the HAC payment adjustment 
provision for all recognized HACs and imposes new reporting requirements for 
Inpatient Prospective Payment System (IPPS) hospitals who wish to receive the 
full 2010 payment update. 

As part of its continued efforts to promote patient safety and health care 
quality, as well as support its value-based purchaser model, CMS developed 
strategies to combat expensive and preventable inpatient complications. In 2005, 
Congress, in its attempt to reduce the incidence of HACs, authorized CMS to 
adjust the IPPS to encourage hospitals to prevent medical errors. Legislation 
required CMS to identify at least two adverse HACs that were: (1) high cost, 
high volume, or both; (2) assigned to a higher paying diagnosis related group 
(DRG) when present as a secondary diagnosis; and (3) could reasonably have 

257. M§§681.1(e)(lH2). 

258. M§§681.1(e)(3)-(4). 

259. Prospective Payment Systems for Inpatient Hospital Services, 73 Fed. Reg. 48,754 (Aug. 
19, 2008) (to be codified at 42 C.F.R. pt. 412) 

260. 42 C.F.R. § 412.22(e)(vi) (2008). 

1034 INDIANA LAW REVIEW [Vol. 42: 1003 

been prevented through the application of evidence-based guidelines. ^^' 

CMS ultimately selected the following HACs for hospitals to report on 
beginning on October 1, 2007: (1) foreign object retained after surgery; (2) 
surgical site infection after coronary artery bypass graft surgery; (3) air 
embolism; (4) blood incompatibility; (5) catheter-associated urinary tract 
infection; (6) pressure ulcer (stages IQ and IV); (7) vascular catheter-associated 
infection; and (8) bums, electric shock, and certain types of falls and traumatic 
injuries. ^^^ 

1. Newly Released HACs and the Payment Adjustment Provision. — Although 
the proposed rule for the FY 2009 rulemaking period sought comments on 
numerous HAC candidates, CMS ultimately chose to add two HACs, expand the 
HAC relating to surgical site infection, and clarify two recognized HACs. Under 
the final rule, manifestations of poor glycemic control and deep vein thrombosis 
and pulmonary embolism following total hip or knee replacement were 
recognized as an HACs.^^^ Additionally, the final rule expanded the surgical site 
infection HAC to include those following certain orthopedic procedures and 
bariatric surgery for obesity.^^"^ Finally, the final rule refined diagnosis codes to 
include the payment provision in both the foreign object retention HAC and 
pressure ulcer HAC.^^^ 

The final rule also provided that as of October 1 , 2008, any HAC adopted by 
CMS would only be paid at the higher DRG rate as a secondary diagnosis if it 
was present on admission.^^^ This is often referred to by CMS as the HAC 
payment adjustment provision. This payment adjustment provision allows 
Medicare to deny payment at the higher DRG rate when a HAC, not present on 
admission, is later claimed as a secondary diagnosis within the higher paying 
DRG. As part of this provision, hospitals would be required to report whether 
the secondary diagnoses were present on admission when submitting their claims. 

The payment adjustment provision clearly targets reimbursement by linking 
payment for health care services to quality of care. Medical record 
documentation will be invaluable in establishing whether or not a particular 
condition was present on admission. 

2. Expanding Reporting of Hospital Quality Data, — In the final rule, CMS 
expanded the list of reportable quality measures under the Reporting Hospital 
Quality Data for Annual Payment Update Program.^^^ Previously, this program 
required hospitals to report thirty quality measures on inpatient claims in order 

261. Deficit Reduction Act of 2005, S. 1932, 109th Cong. § 5001(c) (2006) (enacted). 

262. Medicare Program; Changes to Hospital Inpatient Prospective Payment System and Fiscal 
Year 2008 Rates, 72 Fed. Reg. 47,130 (Aug. 22, 2007) (to be codified at 42 C.F.R. pt. 41 1). 

263. /J. at 47,215. 

264. /J. at 47,244, 47,261. 

265. /rf. at 48,168. 

266. Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and 
Fiscal Year 2009 Rates, 73 Fed. Reg. 48,433, 48,444 (Aug. 19, 2008) (to be codified at 42 C.F.R. 

267. Mat 48,617. 

2009] HEALTH CARE LAW 1035 

to qualify for a full update to their Medicare payment rates. However, in the 
final rule, CMS added thirteen new reportable measures to this list and retired a 
pneumonia measure, bringing the total number of reportable quality measures to 
forty-two. The thirteen new reportable quality measures include: Surgical Care 
Improvement Project (SCIP) Measure, Readmission Measure, Nursing Sensitive 
Measure, Agency for Healthcare Research and Quality (AHRQ) Quality 
Indicators, and Cardiac Surgery Measure.^^^ 

According to the final rule, CMS will reduce the Medicare payment update 
amount by two percent for any hospital that fails to successfully report quality 
measures.^^^ In doing so, CMS has once again directed its enforcement at the 
bottom line. Hospitals who fail to fully comply with this emphasis on quality, 
efficiency, and transparency will see their reimbursement decline. 

HACs are of great concern to both the public and health care providers. The 
occurrence of these conditions not only decreases the quality of care but also 
costs federal health care programs billions of dollars each year. Since paying for 
HACs is inconsistent with Medicare payment reforms, CMS is increasing 
financial consequences to encourage providers to reduce their occurrence. 

VI. Changes to Hospital Conditions of Participation 

A. Hospital Conditions of Participation Interpretive Guidelines 

On April 11, 2008, the CMS issued a Survey & Certification transmittal 
(S&C)^^^ to state survey agencies regarding the revised Medicare Conditions of 
Participation Interpretive Guidelines (Guidelines) for hospitals. The Guidelines 
serve as the basis for determining hospital compliance, and the S&C provides an 
advance copy of amendments to, and an accompanying explanation of. Appendix 
A of the State Operations Manual. ^^^ 

The new Guidelines correspond to the amended Hospital Conditions of 
Participation (CoPs) published on November 27, 2006. The Guidelines also 
reflect changes in the regulations from the 2008 Outpatient Prospective Payment 
System (OPPS), which became effective January 1, 2008. The Guidelines 
incorporate previously issued CMS guidance into the SOM for Hospitals. 

The revised Guidelines reflect CMS' interpretations of the CoPs which 
address the following areas: history and physicals (H&Ps), post anesthesia 
evaluations, verbal orders, security of medications, infection control and 

268. Id at 48,609. 

269. Id. at 48,768. 

270. Dep't OF Health & Human Servs., Hospitals — Restraint/Seclusion Interpretive 
Guidelines & Updated State Operations Manual (SOM) Appenddc A (2008), available at 1 8.pdf [hereinafter 

27 1 . Dep't of Health & Human Servs., State Operations Manual (2004), available at 
99&sortByDID= 1 &sortOrder=ascending&itemID=CMS 1 20 1 984&intNumPerPage= 10. 

1036 INDIANA LAW REVIEW [Vol. 42: 1003 

communicable diseases, and patient rights. Most noteworthy are CMS' 
interpretations and examples of restraints and seclusion, training requirements, 
and death reporting. Also included are many Guidelines on Medicare discharge 
appeal rights, informed consent, and medication and pharmacy, including 
medication management and disclosure requirements for physician-owned 
hospitals. The Guidelines were immediately upon the publication date. 

7. Restraint and/or Seclusion — Sections 482.13(e)-(g). — The restraint and 
seclusion section of the Guidelines is quite expansive and provides numerous 
examples of what CMS deems a restraint or seclusion.^^^ CMS also provides 
information about what constitutes a minimal assessment prior to the initiation 
of a restraint or seclusion of the patient.^^^ CMS states that "[t]he decision to use 
a restraint or seclusion is not driven by diagnosis, but by a comprehensive 
individual patient assessment."^^"^ The Guidelines also provide information 
regarding the hospital's inappropriate use of weapons, the use of drugs or 
medications which may or may not be a part of the patient's standard medical 
treatment, and the type of devices or methods used by practitioners that are not 
considered restraints. ^^^ 

The Guidelines address significant details regarding the scope of training, 
who must be trained, and the qualifications of the trainers prior to use of the 
restraint or seclusion.^^^ There is considerable discussion regarding the method 
and manner of face to face evaluations of the patient.^^^ All of these 
requirements must be on file and set forth in the hospital's policies and 
procedures. The Guidelines dictate that states are free to set requirements by 
statute or regulation that are more restrictive than the federal regulations so long 
as they do not conflict with federal requirements. CMS has also included 
numerous resources for clinicians to provide further guidance. 

2. History and Physical Examinations — Section 482.24(c)(2). — On 
November 27, 2006, CMS issued a revised rule requiring that H&Ps be 
completed no more than thirty days before, or twenty-four hours after, admission 
for each patient, or prior to a surgery or procedure requiring anesthesia.^^^ 
Additionally, an H&P or an update to an H&P, is required prior to surgery and 
for procedures requiring anesthesia services, regardless of whether care is being 
provided on an inpatient or outpatient basis. ^^^ 

The new CoPs expand the permissible professional categories of individuals 
who may perform an H&P.^^^ The new rule allows physicians, oral maxillofacial 

272. Guidelines, supra note 276, at 83. 

273. /J. at 85. 

274. Mat 83. 

275. Id. at 86. 

276. Mat 110. 

277. M. at 113. 

278. Medicare and Medicaid Programs; Hospital Conditions of Participation, 71 Fed. Reg. 
68,671, 68,673 (Nov. 27, 2006) (to be codified at 42 C.F.R. pt. 482). 

279. M. at 68,674. 

280. Guidelines, supra note 276, at 148. 

2009] HEALTH CARE LAW 1037 

surgeons, or "other qualified licensed individuals] in accordance with State law 
and hospital policy" to perform H&Ps.^^* The Guidelines interpret such "other 
qualified practitioners" as including nurse practitioners and physician 

The revised CoPs mandate that an H&P performed prior to admission (within 
at least thirty days before admission) must be updated within twenty-four hours 
of admission or prior to surgery, whichever comes first.^^^ The Guidelines 
explain that this update must be completed and documented by a licensed 
practitioner credentialed and privileged by the hospital's medical staff. ^^"^ If the 
practitioner performing the update finds no change in the patient's condition 
since the last H&P was completed, then the practitioner may indicate in the 
patient's medical record that the H&P was reviewed, the patient was examined, 
and may enter "no change" in the patient's medical record.^^^ However, if the 
practitioner finds that an H&P performed prior to admission was incomplete, 
then the practitioner must conduct and document a new H&P in the medical 
record within twenty-four hours after admission or registration.^^^ This must be 
done prior to the performance of a surgery or procedure requiring anesthesia.^^^ 

3. Authentication of Verbal Orders — Section 482.24(c)(1). — The CoPs 
emphasize that hospitals should use verbal orders sparingly, if at all. The 
Guidelines reiterate that verbal orders must not be a common practice as they 
increase the risk of miscommunication, which could contribute to error, resulting 
in an adverse patient event.^^^ Hospitals are expected to develop appropriate 
policies and procedures that govern the use of verbal orders and minimize their 
use.^^^ If there is no state law that designates a specific timeframe for the 
authentication of verbal orders, such orders must be authenticated within forty- 
eight hours.^^^ 

All orders, including verbal ones, must be dated, timed, and promptly 
authenticated by the ordering practitioner.^^' Verbal orders must be immediately 
documented in the patient's medical record and signed by the individual 
receiving the order.^^^ CMS expects the nationally accepted "read-back" 
verification practice to be used for every verbal order.^^^ Verbal orders may only 
be accepted by persons authorized to do so by hospital policy and procedure. 

281. Id. 

282. Id. Sit 149. 

283. W. at 150. 

284. Id. 

285. /J. at 151. 

286. Id. 

287. Id. 

288. Id. at 166. 

289. Id. 

290. Mat 181. 

291. Mat 179. 

292. Id. at 116. 

293. Id. at 179. 

1038 INDIANA LAW REVIEW [Vol. 42: 1003 

which must be consistent with federal and state law.^^"^ The receiver of any 
verbal order must date, time, and sign the verbal order according to hospital 
policy. ^^^ CMS expects that if verbal orders are received, then the hospital's 
policy must include a **read-back and verification process [es]."^^^ Where the 
ordering practitioner cannot authenticate his or her verbal order, another 
practitioner who is responsible for the patient' s care may authenticate that verbal 

4. Securing Medications — Section 482.25(b)(2)(i). — Previously, the CoPs 
required that all drugs and biologicals be kept in a locked storage area.^^^ 
Further, all drugs categorized as Schedule H, IQ, IV, or V were required to be 
locked in a secure storage area available only to authorized personnel.^^^ The 
CoPs now require that all drugs and biologicals be kept in a secure area.^^^ CMS 
defines a "secure area" as one that prevents "unmonitored access by unauthorized 
individuals. "^^^ Labor and delivery suites in critical care units staffed twenty- 
four hours a day are considered secure areas so long as entries and exits are 
limited to appropriate staff, patients, and visitor s.^^^ 

Operating room suites are considered secure only when the areas are staffed 
and care is being actively provided.^^^ The Guidelines go on to state that 
materials must not be stored in areas that are readily accessible to unauthorized 
personnel. ^^'^ It is also important to note that although the storage of non- 
controlled drugs and biologicals is a bit more flexible, controlled substances must 
be kept in locked storage.^^^ In the event a patient care area is not staffed, 
hospitals must be sure that both controlled and non-controlled substances are 
locked up at all times. ^^^ If a hospital uses mobile nursing medication carts, 
anesthesia carts, epidural carts, or any other type of medication cart that contains 
controlled substances, all drugs must be locked to prevent unmonitored access. ^^^ 

When a patient is self-administering his or her medications, hospitals are 
expected to address this aspect in their policies and procedures to ensure that the 
medications are secure at the patient's bedside.^^^ 

5. Completion of Post-Anesthesia Evaluation — Section 482.52(b)(3). — 

294. Id. 

295. Id. at 176. 

296. Mat 179. 

297. Id. 

298. 42 C.F.R. § 482.25(b)(2)(i) (2008). 

299. Id. § 482.25(b)(2)(ii). 

300. Guidelines, supra note 276, at 207. 

301. Id. 

302. Id. 

303. /J. at 208. 

304. Id. at 201. 

305. Id. 

306. Id. 

307. Mat 208. 

308. Id. 

2009] HEALTH CARE LAW 1039 

Under the previous CoPs, only individuals who administered anesthesia could 
perform post-anesthesia e valuations. ^^^ The revised CoPs now state that post- 
anesthesia evaluations and documentations may be done by any individual 
qualified to administer anesthesia.^ ^^ This revision of the rules grants hospitals 
and staff much greater flexibility when completing post-anesthesia evaluations. 
It should also be noted that the new CoPs require post-anesthesia evaluations and 
documentations be completed within forty-eight hours of surgery.^^^ 

The Guidelines provide greater clarification on the new CoPs regarding post- 
anesthesia evaluations. CMS requires such an evaluation to be performed any 
time general, regional, or monitored anesthesia is administered to a patient.^ ^^ 
The Guidelines also provide clarification as to the definition of a "practitioner 
qualified to administer anesthesia," including in its definition a qualified 
anesthesiologist, a doctor of medicine or osteopathy, a dentist, and a certified 
registered nurse anesthetist.^ ^"^ Anesthesiologist's assistants may also complete 
the post-anesthesia evaluation and documentation so long as the anesthesiologist 
who is supervising the assistant is immediately available.^ ^'^ The Guidelines do 
not require a post-anesthesia evaluation and documentation to be performed on 
patients who receive conscious sedation.^ '^ 

B, Revisions to the Hospital Interpretive Guidelines for Infection Control 

On November 21, 2007, CMS issued a S&C^^^ to state survey agencies 
regarding revisions to the Hospital Interpretive Guidelines for Infection Control 
(Revisions). The Revisions were published in an effort to address the changing 
infectious disease threats, as well as new mechanisms to confront these threats, 
that have emerged in recent years.^^^ 

The Revisions require hospitals "to develop, implement, and maintain an 
active, hospital-wide program for the prevention, control, and investigation of 
infections and communicable diseases."^^^ The program must "be conducted in 
accordance with nationally recognized infection control practices or guidelines, 
as well as applicable regulations of other federal or state agencies. "^^^ 
Furthermore, the program must contain a surveillance component to identify 

309. 42 C.F.R. § 482.52(b)(3) (2008). 

310. Guidelines, supra note 276, at 32 1 . 

311. Id. 

312. /J. at 322. 

313. Id. 

314. Id. 

315. Id. 

316. Dep't of Health & Human Servs., Revisions to the Hospital Interpretive 
Guidelines for Infection Control (2007), available at 
CertificationGenInfo/downloads/SCLetter08-04.pdf [hereinafter Revisions] . 

317. /J. atl. 

318. /J. at 3. 

319. Id. 

1040 INDIANA LAW REVIEW [Vol. 42: 1003 

infectious risks or communicable disease problems at any particular location 
within the hospital.^^^ The Revisions delineate the obligations of the hospital- 
appointed infection control officer and the protocols with which he or she must 
comply. ^^^ The Revisions also discuss the responsibilities of the Chief Executive 
Officer, Medical Staff, and Director of Nursing Services with regard to infection 

C. Enforcement of Requirements for Certain Hospital and Critical Access 
Hospital (CAH) Disclosures to Patients 

On December 14, 2007, CMS issued a S&C^^^ to state survey agencies 
regarding the enforcement of disclosure requirements for certain hospitals and 
critical access hospitals (CAHs). This memorandum discusses patient disclosure 
obligations for physician-owned hospitals and CAHs.^^"^ Under the final rule 
governing the hospital inpatient prospective payment system, all physician- 
owned hospitals and CAHs must provide written notice to a patient at the 
beginning of stay or visit that the hospital or CAH is physician-owned.^^^ The 
purpose of this rule is to enable patients to make an informed decision about his 
or her care. The notice must be made in a manner reasonably understood by all 
patients. ^^^ 

The final rule amends 42 C.F.R. section 489.12 to enable CMS "to deny a 
provider agreement to a hospital or CAH applicant that does not have procedures 
in place to notify patients of physician ownership in the hospital."^^^ 
Furthermore, CMS may terminate a provider agreement that does not comply 
with the new disclosure requirements. ^^^ "Enforcement of the mandatory 
disclosure requirements is linked to the Patients' Rights CoP for hospitals and the 
compliance with Federal, State and local laws and regulations CoP for CAHs."^^^ 
Compliance with the disclosure requirements will be assessed when the hospital 
is surveyed for compliance. ^^^ 

320. Mat 4. 

321. /(i. at 7-13. 


323. Dep't of Health & Human Servs., Enforcement of Requirements for Certain 
Hospitals and Critical Access Hospitals (CAH) Disclosures to Patients (2007), available 
at .pdf [hereinafter 

324. Id. all. 

325. Id. 

326. Id. 

327. Mat 2. 

328. Id. 

329. Id. 

330. Id. at 3. 

2009] HEALTH CARE LAW 1041 

vn. Changes to Hospice Conditions of Participation 

On June 5, 2008, CMS issued a final rule revising the Hospice CoPs, which 
all hospices are required to meet to participate in the Medicare and Medicaid 
programs.^^^ Effective December 2, 2008, the final rule addresses the comments 
received by CMS on the proposed rule published in 2005.^^^ The revised CoPs 
are a flexible framework for continuous quality improvement in hospice care and 
reflect current standards of practice. Further, the CoPs focus on a patient- 
centered, outcome-oriented, and transparent process that promotes quality patient 
care while allowing for flexibility in meeting quality standards.^^^ The final rule 
marks CMS' first overhaul of regulations governing the hospice industry since 
1983.^^"^ These CoPs address patient rights and quality of care, as well as the 
relationship between hospices and the nursing facilities to whose patients they 
provide services. ^^^ 

While many hospice patients are already active in their own treatment plans, 
this regulation is the first to set out a detailed list of patient rights. Specifically, 
the rule says that patients who choose hospice, or palliative care, over curative 
treatment are entitled to such things as participation in the development of his or 
her plan of care, the right to effective pain management, and the right to choose 
his or her attending physician. ^^^ 

In addition to the patient rights' section, the CoPs created measures for the 
quality of care of hospice patients. For example, the CoPs require hospices to 
implement "an effective, ongoing, hospice-wide data-driven quality assessment 
and performance improvement [(QAPI)] program."^^^ The CoPs allow hospices 
to develop their own QAPI program to cater to their own goals and needs instead 
of mandating a particular mechanism to implement this program.^^^ Furthermore, 
the CoPs require a comprehensive assessment to take place. ^^^ 

Additionally, the CoPs create other quality measures, such as a requirement 
that patient needs be initially assessed within 48 hours of electing the hospice 
benefit.^^^ The rule also requires that a comprehensive assessment occur within 
five days of electing the hospice and that updated assessments be conducted at 
least every fifteen days thereafter. ^"^^ Further, the CoPs create a requirement that 

331. Medicare and Medicaid Programs: Hospice Conditions of Participation, 73 Fed. Reg. 
32,087 (June 5, 2008) (to be codified at 42 C.F.R. pt. 418). 

332. Id. at 32,088. 

333. Id. 

334. Id. 

335. Id. 

336. See 42 C.F.R. § 418.52 (2008). 

337. Id. § 418.58. 

338. Medicare and Medicaid Programs: Hospice Conditions of Participation, 73 Fed. Reg. at 

339. 42 C.F.R. § 418.54(c) (2008). 

340. Id. § 418.54(a). 

341. Id. §418. 54(d). 

1042 INDIANA LAW REVIEW [Vol. 42: 1003 

each patient receive a full drug profile that examines issues ranging from the 
effectiveness of current drug therapies to potential drug interactions to drug side 
effects.^"^^ A treatment team will consult with a qualified individual, such as a 
pharmacist, to ensure that drugs meet the needs of every hospice patient.^"^^ 
Moreover, the CoPs recommend the use of a patient-centered interdisciplinary 
approach that recognizes the contributions of various skilled professionals and 
other support personnel and their interaction with each other to meet the patients' 
needs. ^"^"^ 

The CoPs also establish certain requirements for relationships among 
hospices. For instance, the CoPs allow a hospice to contract with another 
Medicare-certified hospice for nursing, medical, social services, and counseling 
services under extraordinary or other non-routine circumstances, including travel 
of a patient outside of the hospice's service area.^"^^ Moreover, the new CoPs 
remove a previous provision which required an inpatient facility only providing 
respite care to have a registered nurse on duty twenty-four hours a day.^"^^ 
Instead, the patients' needs, acuity, and plan of care will drive the nursing and 
staffing requirements. 

Finally, CMS created requirements for hospices with respect to their 
relationships with nursing facilities. Because a hospice's access to nursing 
facility patients is directly dependent on the nursing facility's operator, CMS 
created several additional requirements in an effort to reduce the potential for 
fraud and abuse. The CoPs require that a written agreement must be in place 
between a nursing facility and hospice if the hospice provides services in the 
facility.^"^^ Furthermore, the CoP lists the minimum requirements for such 

Instead of ensuring quality through a problem-oriented, after-the-fact 
corrective approach of quality assurance, the CoPs suggest a shift towards a more 
quality-conscious, preemptive approach to hospice care. This approach will 
require hospice administrators to review current operating policies and 
procedures and create agreements with nursing facilities to ensure compliance. 

342. Id. §418.54(c)(b). 

343. Medicare and Medicaid Programs: Hospice Conditions of Participation, 73 Fed. Reg. at 

344. /t/. at 32,088. 

345. Id. at 32,123; see also 42 C.F.R. § 418.64 (2008). 

346. Medicare and Medicaid Programs: Hospice Conditions of Participation, 73 Fed. Reg. at 

347. Id. at 32,216; see also 42 C.F.R. § 418.112 (2008). 

348. Medicare and Medicaid Programs: Hospice Conditions of Participation, 73 Fed. Reg. at 


2009] HEALTH CARE LAW 1043 

vm. Antitrust 

A. Clinical Integration 

In September of 2007, the FTC issued an advisory opinion informing the 
Greater Rochester Independent Practice Association, Inc. (GRIP A) that it would 
not challenge the organization' s proposed operation as a non-exclusive physician 
network joint venture. The FTC found that the proposed program would involve 
substantial integration among its physician participants that had the potential to 
produce significant efficiencies in the provision of medical services, and that the 
joint contracting with payors on behalf of the GRIPA's physicians was 
subordinate and reasonably necessary.^"^^ 

GRIPA is the fourth in a series of advisory opinions issued by the FTC 
focusing on clinical integration since clinical integration' s first description in the 
FTC's 1996 Statements of Antitrust Enforcement Policy in Health Care?^^ In 
each subsequent opinion, the FTC continues to refine its guidance on the types 
of programs it considers sufficiently integrated to stave off an antitrust challenge. 

In GRIPA, the FTC found that joint contracting was ancillary to the 
efficiency enhancing purpose of the program.^^^ In reviewing the program, the 
FTC noted certain key program provisions. Although one of the goals of the 
program was to increase physician reimbursement, it did so not through market 
power, but rather through improved quality and more cost-effective utilization. 
Also, the FTC noted with approval the investment of both time and money that 
the physicians would be required to undertake in the clinical integration program, 
including: collaborative development of practice guidelines, coordinated 
delivery of medical care, and sharing of treatment information through a clinical 
information system.^^^ At the end of the day, the FTC concluded that the 
proposed program was unlikely to have anticompetitive effects or allow GRIPA 
to exercise market power. ^^^ 

Clinical integration continues to be on the FTC's radar screen and will 
continue to raise antitrust issues. It is becoming clear that multi-specialty 
programs with strong clinical management, robust outcomes measurement, and 
significant physician interdependence can generate sufficient efficiencies to 
overcome the risk of antitrust challenge. Look for the FTC to continue to refine 
its guidance on clinical integration in the foreseeable future.^^"^ 

349. Fed. Trade Comm'n, Greater Rochester Indep. Practice Ass'n, Inc., Advisory 
Opinion 1 (Sept. 17, 2007), available at [hereinafter 

350. U.S. Dep't of Justice & Fed. Trade Comm'n, Statements of Antitrust 
Enforcement Policy in Health Care (1996), available at 
guidelines/ 1791 .htm. 

351. GRIPA, supra note 355, at 1. 

352. Id. 

353. Id. 

354. See Fed. Trade Comm'nTriState Health Partners, Inc., Advisory Opinion 1 (Apr. 

1044 INDIANA LAW REVIEW [Vol. 42: 1003 

B. Cascade Health Solutions v. PeaceHealth 

In Cascade Health Solutions v. PeaceHealth^^^ the Ninth Circuit found that 
the exclusionary conduct element of a claim, arising under section 2 of the 
Sherman Act, against a defendant with monopoly power, over one or more of the 
bundled products, cannot be satisfied by reference to bundled discounts unless 
the discounts result in prices that are below an appropriate measure of the 
defendant's costs. ^^^ 

PeaceHealth and McKenzie-Williamette Hospital (Cascade)^^^ were the only 
two hospital care providers in Lane County, Oregon. PeaceHealth operated three 
hospitals with a total of 464 beds, offering primary, secondary, and tertiary care. 
Cascade operated one hospital with 114 beds, which provided only primary and 
secondary care.^^^ In what Cascade alleged as unlawful monopolization, 
attempted monopolization, conspiracy to monopolize, tying, exclusive dealing, 
and violations of state law, PeaceHealth offered insurers discounts of thirty-five 
to forty percent on tertiary services if the insurers made PeaceHealth their sole 
preferred provider for all services — primary, secondary, and tertiary.^^^ In 
essence, PeaceHealth bundled its services, including its tertiary services, which 
Cascade did not provide to offer bigger discounts across the board in order to 
obtain an exclusive contract. Because Cascade did not provide tertiary services, 
it could not match the aggregate savings payors enjoyed under an exclusive 
contract with PeaceHealth. Thus, the issue became whether the bundled discount 
amounted to predatory conduct because Cascade was effectively foreclosed from 
at least one key payor contract. 

Consumers are faced with bundled discounts on a daily basis. ^^^ Sometimes 
bundled discounts are good for consumers because they offer products at lower 
prices. But sometimes bundled discounts can lead to anti-competitive 
behavior — offering lower prices to monopolize the market leading to higher 

13, 2009), available a/ 

355. 515 F.3d 883 (9th Cir. 2008). 

356. Id. at 903; cf. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 
222, 224 (1993) (requiring that a plaintiff prove that defendant's price was below cost and that 
defendant had a reasonable probability of recouping its investment in below cost prices); LePage's, 
Inc. V. 3M, 324 F.3d 141, 154 (3d Cir. 2003) (en banc) (foregoing cost analysis with respect to 
defendants with monopoly power, and concluding that all bundled discounts offered by a 
monopolist are anticompetitive with respect to sellers that do not offer an equally diverse product 
line), cert, denied, 542 U.S. 953 (2004). 

357. As a result of a merger with Triad Hospital, Inc., McKenzie's name changed to Cascade 
Health Solutions. Cascade, 515 F.3d at 891. 

358. Id. "Primary and secondary acute care hospital services are common medical services like 
setting a broken bone and performing a tonsillectomy .... '[T]ertiary care' . . . includes more 
complex services like invasive cardiovascular surgery and intensive neonatal care." Id. 

359. Mat 892. 

360. See id. at 894. 

2009] HEALTH CARE LAW 1045 

prices in the future.^^' In Cascade the Ninth Circuit tried to determine when 
bundled discounts are "good" and when they are "bad." 

The Ninth Circuit adopted a discount allocation standard that allocates the 
full amount of the discounts given by the defendant on the bundle to the 
competitive product or products. ^^^ In other words, the court reallocated the 
discount amount offered by PeaceHealth for tertiary services to PeaceHealth's 
primary and secondary services as if payors paid full charges on tertiary services 
and discounted amount on primary and secondary services. The court concluded 
that if the resulting price of the competitive product, or products, is below the 
defendant's incremental cost to produce them, the trier of fact may find that the 
bundled discount is exclusionary for the purpose of section 2.^^^ This standard 
allows a defendant to offer bundled discounts unless the discounts would exclude 
an equally efficient producer of the product. The Ninth Circuit championed that 
the discount attribution standard provides clear guidance for sellers that engage 
in bundled discounting, because a seller can easily ascertain its own price and 
costs of production and calculate whether its discounting practices run afoul of 
the standard.^^"^ 

In adopting the discount allocation standard, the Ninth Circuit rejected the 
standard set forth in LePage 's Inc. v. 3M, thereby creating a split among the 
circuits over the appropriate legal standard for evaluating bundled discounting 
practices. ^^^ Because the LePage 's standard could insulate a less efficient rival 
from legitimate competition at the expense of consumer welfare, a discount 
reallocation methodology should be favored. However, in the health care 
industry and other industries where seller list prices have little relevance to 
negotiated rates, a methodology that reallocates the incremental discount offered 
for the bundled products or services should be adopted. 

IX. Labor & Employment 

A. Indiana Case Law Update: Enforceability of Physician Noncompetes 

On March 11, 2008, the Indiana Supreme Court ruled on its first physician 
covenant not to compete case in nearly twenty-five years. ^^^ The decision will 
likely impact the enforceability of many existing noncompetition agreements. 

From 1996 through 2005, Dr. Kenneth Krueger, a podiatrist, worked with 

361. As noted in Cascade, "it is possible, at least in theory, for a firm to use a bundled 
discount to exclude an equally or more efficient competitor and thereby reduce consumer welfare 
in the long run." Id. at 896 (citing RICHARD A. POSNER, ANTITRUST LAW 236 (2d ed. 2001)). 

362. /J. at 906. 

363. Id. 

364. Id. at 907. 

365. /^. at 903. 

366. Cent. Ind. Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008). Prior to Central 
Indiana Podiatry, the last physician noncompete case the court ruled on was Raymundo v. 
Hammond Clinic Ass'n, 449 N.E.2d 276 (Ind. 1983). 

1046 INDIANA LAW REVIEW [Vol. 42: 1003 

Central Indiana Podiatry, P.C. (CIP), which maintains offices in counties 
throughout central Indiana.^^^ Krueger had worked at CIP offices in Clinton, 
Marion, Howard, Tippecanoe, and Hamilton counties. ^^^ But, in the last two 
years of his employment he only split his time at offices in Marion, Tippecanoe, 
and Howard counties. ^^^ CIP and Krueger had an employment agreement 
including a noncompete that prohibited Krueger from practicing podiatry for two 
years in an area defined as fourteen listed central Indiana counties where CIP 
maintained offices and all counties adjacent thereto, essentially the middle half 
of the state of Indiana. ^^° On July 25, 2005, CIP terminated Krueger and in 
September 2005, Krueger entered into an agreement with Meridian Health 
Group, P.C. (Meridian) and began practicing podiatry in Hamilton County, 
Indiana, about ten minutes away from the Indianapolis office at which he had 
been working with CIP.^^^ Krueger provided Meridian with a copy of the CIP 
patient list and created a letter to be mailed to patients which stated his new 
employment was within ten minutes of his previous office.^^^ 

When CIP learned of the letter, it sought injunctive relief against Krueger 
and damages from Krueger and Meridian on the basis that Krueger' s employment 
violated the geographic restriction of the noncompete.^^^ The trial court found 
that the geographic restriction was unenforceable and denied CIP's request for 
injunctive relief .^^"^ The court of appeals disagreed and reversed the trial court.^^^ 
The Indiana Supreme Court addressed the issue and ultimately ruled the covenant 
was only enforceable in Marion, Tippecanoe, and Howard counties, affirming the 
trial court's decision that it was unenforceable elsewhere, particularly as to 
Hamilton County where Krueger was competing.^^^ 

The court began its opinion by reconsidering whether physicians should be 
able to enter into noncompetition agreements at all, given the nature of the 
physician-patient relationship.^^^ The court first addressed this argument in 1983 
in Raymundo v. Hammond Clinic Ass 'n,^^^ holding that physician noncompetes 
were not void because of such concems.^^^ This conclusion is consistent with the 
vast majority of other U.S. jurisdictions allowing noncompetes with reasonable 

367. Cent. Ind. Podiatry, 882 N.E.2ci at 725-26. 

368. Id. at 726. 

369. Id. 

370. Id. at 125-26. 

371. Id. at 126. 

372. Id. 

373. Id. 

374. Id. 

375. Id. (citing Cent. Ind. Podiatry, P.C. v. Krueger, 859 N.E.2d 686, 689 (Ind. Ct. App. 
2007), trans, granted, 882 N.E.2d 723 (Ind. 2008)). 

376. Id. at 131. 

377. Id. at 727-28. 

378. 449 N.E.2d 276 (Ind. 1983). 

379. Cent. Ind. Podiatry, 882 N.E.2d at 728 (citing Raymundo, 449 N.E.2d at 280-81). 

2009] HEALTH CARE LAW 1047 

restrictions.^^° The court observed that noncompetes with physicians are 
different from noncompetes in other business settings where typically only the 
employer and employee are impacted by enforcement of the noncompete. ^^^ 
Patients are impacted more by physician noncompetes than the average business 
consumer.^^^ Patients often seek out particular physicians, and noncompetes may 
impair patient choice and confidence.^^^ The court determined that those 
concerns require physician noncompetes to be given "particularly careful 
scrutiny," even beyond the disfavor with which all noncompetes are viewed. ^^"^ 
But, the court upheld its earlier ruling that physician noncompetes are not void 
due to those public policy concerns, noting that any contrary decision is better 
left to the state legislature.^^^ 

The court then examined the reasonableness of Krueger's noncompete 
covenant.^^^ In order for a noncompete to be enforceable, it must be 
reasonable.^^^ An employer seeking to enforce a noncompete "must first show 
that it has a legitimate interest to be protected by the agreement."^^^ Then, the 
employer also must show the noncompete is reasonable in its scope "as to time, 
activity and geographic area restricted."^^^ The court found that CIP 
demonstrated a legitimate interest in preserving patient relationships developed 
with CIP resources. ^^^ However, it found the geographic scope of the 
noncompete to be unreasonable because Krueger had not actually used CIP 
resources to develop patient relationships outside of the areas served by the 
particular locations at which he had worked in the last two years of his 
employment. ^^^ The Court refused to enforce the noncompete outside areas in 
which Krueger himself developed patient relationships, even though the CIP had 
other offices throughout the area covered by the noncompete. ^^^ 

As a result of finding the covenant unreasonable, the court then looked to 
whether any of it could be saved by striking the unreasonable portions from the 
agreement under what is known as the "blue-pencil" doctrine.^^^ Since the 

380. Id. (citing Ferdinand S. Tinio, Annotation, Validity and Construction of Contractual 
Restrictions on Right of Medical Practitioner to Practice, Incident to Employment Agreement, 62 
A.L.R. 3d 1014 §§ 6-25 (1975)). 

381. Id. 21121. 

382. Id. 

383. Id. 

384. Id. at 729. 

385. /J. at 728. 

386. /6?. at 728-31. 

387. Id. at 729 (citing Raymundo v. Hammond Clinic Ass'n, 449 N.E.2d 276, 280 (Ind. 

388. Id. (citing Sharvelle v. Magnante, 836 N.E.2d 432, 436-37 (Ind. Ct. App. 2005)). 

389. Id. (citing Sharvelle, 836 N.E.2d at 436). 

390. Id. 

391. /6?. at 730-31. 

392. Id. at 730. 

393. Id. (citing Dicen v. New Sesco, Inc., 839 N.E.2d 684, 687 (Ind. 2005)). 

1048 INDIANA LAW REVIEW [Vol. 42: 1003 

Agreement specifically listed particular counties by name, the court was able to 
strike all of them, except for Marion, Tippecanoe, and Howard counties to create 
a reasonable and enforceable restriction.^^"^ The court also found it necessary to 
strike the language extending the noncompete to adjacent, or contiguous, 
counties. ^^^ The court reasoned that even though Krueger may have developed 
patient relationships that crossed county lines, there was no evidence to suggest 
that there was a substantial number of patients developed in all contiguous 
counties or at their furthest reaches. ^^^ As the non-compete used entire counties 
as its measure of the restriction, the court deleted entire contiguous counties from 
its scope, thereby permitting Krueger to compete in Hamilton county, a mere ten 
minutes away from his former practice.^^^ 

B. Federal Statutory Changes 

L FMLA Update. — The National Defense Authorization Act for Fiscal Year 
2008 was signed on January 28, 2008.^^^ This Act includes amendments to the 
Family and Medical Leave Act (FMLA),^^^ which provide additional leave 
benefits to eligible relatives of military service members under two 
circumstances, "Servicemember Family Leave" and "Qualifying Exigency.'"^^^ 

The first amendment to the FMLA provides an eligible employee a total of 
twelve weeks of leave during a twelve month period because of any qualifying 
exigency arising out of the fact that the spouse, son, daughter, or parent of the 
employee is on active duty or has been notified of an impending call or order to 
active duty."^^^ If foreseeable, an employee requesting leave due to a qualifying 
exigency must provide reasonable notice. "^^^ Under the second amendment, an 
eligible employee who is the spouse, son, daughter, parent, or next of kin of a 
covered servicemember is entitled to a total of twenty-six weeks of unpaid leave 
to care for that servicemember."^^^ Covered servicemembers include those 
undergoing medical treatment, recuperation, or therapy, are otherwise in 
outpatient status, or are on the temporary disability retired list for a serious injury 

394. /J. at 731. 

395. Id. 

396. /J. at 730-31. 

397. Mat 731. 

398. National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 1 1 0- 1 8 1 , 1 22 Stat. 
3 (2008). 

399. 29 U.S.C. §§ 2601-2654 (2006). 

400. On February 11, 2008, the U.S. Department of Labor published additional proposed 
regulations to significantly modify the FMLA. See 29 C.F.R. § 825 (2008). The final regulations 
became effective January 16, 2009 and included substantive changes and clarifications to the 
FMLA which are outside the timeframe of this article. 

401. 29 U.S.C. §2611. 

402. Id. 

403. Id. 

2009] HEALTH CARE LAW 1049 

or illness. "^^"^ This leave is available during a single twelve month period."^^^ 
Employers may require that eligible employees substitute paid leave for leave 
taken pursuant to either of the amended FMLA pro visions. '^^^ 

2. Genetic Information Nondiscrimination Act. — On May 21, 2008, 
President Bush signed into law the Genetic Information Nondiscrimination Act 
(GIN A) of 2008."^^^ GIN A bars health insurers and employers from 
discriminating against individuals or individual's family members based on their 
genetic information. "^^^ Under GINA, genetic information is broadly defined as 
an individual's genetic tests, the genetic tests of family members, or the 
manifestation of a disease or disorder in the individual' s family members. "^^^ The 
expectation is that GINA will enable individuals to take advantage of genetic 
testing, technology, research, and new therapies without fear of retaliation from 
health insurers or employers. 

As it relates to health insurers, GINA amends several federal laws, including 
the Employee Retirement Income Security Act of 1974 (ERISA), the Public 
Health Service Act, the Internal Revenue Code of 1986, the Social Security Act, 
and the Health Insurance Portability and Accountability Act (HIPAA) to include 
anti-discrimination provisions."^^^ GINA prohibits health insurers from adjusting 
premium amounts or establishing distinct eligibility rules based on genetic 
information. It also prohibits requesting or requiring genetic tests, or requesting, 
requiring, or purchasing genetic information for underwriting or enrollment 
purposes."^^ ^ These restrictions apply to insurers of group health plans, individual 
market plans, government plans, and Medicare supplemental policies."^^^ 

As it relates to employment, GINA covers employers, employment agencies, 
labor organizations, and joint-labor management committees. "^^^ GINA carves out 
the actions employers may take with an applicant or employee's genetic 
information, as well as how employers should maintain this sensitive 
information. Unlawful employment actions under GINA include: (1) using 
genetic information such as family history of a hereditary disease, to make hiring, 
firing, or other employment decisions that affect the compensation, terms, 
conditions, or privileges of employment ;^^'^ (2) limiting, segregating, or 
classifying employees because of genetic information in any way that would 
deprive employees of employment opportunities or otherwise adversely affect 

404. Id. 

405. Id. 

406. Id. 

407. 42 U.S.C. § 2000ff (2006). 

408. Id. § 2000ff-l(a). 

409. Id. § 2000ff-4. 

410. Id. § 2000ff-5. 

411. Id. 

412. Id. 

413. Id. §§2000ff-lto-3. 

414. Id. § 2000ff-l. 

1050 INDIANA LAW REVIEW [Vol. 42: 1003 

employment status;"^'^ (3) requesting, requiring or purchasing an employee's or 
an employee's family member's genetic information, absent one of the prescribed 
exceptions ;'^^^ or (4) except under certain conditions,"^ ^^ disclosing an applicant's 
or an employee' s genetic information."^'^ Regarding employment discrimination, 
GINA is effective November 21, 2009 and will be enforced by the Equal 
Opportunity Commission (EEOC)."^'^ The EEOC proposed regulations on March 
2, 2009 to carry out GINA's employment-related pro visions. "^^^ The final 
regulations must be enacted by May 21, 2009. 

3. ADA Amendments Act. — On September 25, 2008, the ADA Amendments 
Act of 2008 (Act) was passed and became effective January 1, 2009."^^* Most 
significantly, this Act amended the Americans with Disabilities Act of 1990 
(ADA)."^^^ An individual is disabled under the ADA if the individual has "a 
physical or mental impairment that substantially limits one or more major life 
activities," has a record of such impairment, or is regarded as having such an 
impairment."^^^ The Act was primarily aimed at reversing some significant U.S. 
Supreme Court interpretations of the ADA within the last decade, specifically 
regarding who is "disabled," and therefore, protected under the ADA."^^"^ Despite 

415. Id. 

416. Id. There are several exceptions to this prohibition, including where: (1) an employee 
provides prior written authorization; (2) genetic services are offered by the employer; (3) the 
information is inadvertently acquired; (4) the information is obtained for compliance with 
certification requirements of Family and Medical Leave laws; (5) the information is used for genetic 
monitoring of the biological effects of toxic substances in the workplace under limited conditions; 
or (6) the information is required for an employer's forensic laboratory's DNA analysis for law 
enforcement or human remains identification purposes. Id. Also, an employer's acquisition of 
genetic information through the purchase of public materials such as newspapers or magazines is 
not unlawful. Id. 

417. /^. § 2000ff-5. Disclosing information is allowed under certain conditions. For example: 
(1) to an employee upon written request; (2) to an occupational or other health researcher; (3) by 
court order; (4) to a government official investigating compliance with GINA if the information is 
relevant to the investigation; (5) in connection with an employee's compliance with FMLA 
certification provisions; (6) or to a public health agency where the manifestation of a disease or 
disorder concerns a contagious disease that presents an imminent hazard of death or life-threatening 
illness. Id. 

418. Id. § 2000ff(2)(A)(i). 

419. Id. § 2000ff-6. 

420. Regulations Under the Genetic Information Nondiscrimination Act of 2008, 74 Fed. Reg. 
9056 (proposed Mar. 2, 2009) (to be codified at 29 C.F.R. pt. 1635). 

421. ADAAmendmentsActof2008, Pub. L. No. 110-325, 122 Stat. 3553 (2008). 

422. Americans with Disabilities Act of 1990, Pub. L. No. 101-336, 104 Stat. 327 (1990). 

423. 42 U.S.C. § 12102 (2006). 

424. Id. § 12101. The holding of the Supreme Court in Sutton v. United Air Lines, Inc., 527 
U.S. 471 il999\supersededby statute, ADAAmQndmentsActof200S,Pub.L.No. 110-325, 122 
Stat. 3553, and its companion cases narrowed the broad scope of protection intended to be afforded 
by the ADA, thus eliminating from ADA protection many individuals whom Congress intended to 

2009] HEALTH CARE LAW 105 1 

the intended broad coverage of the ADA, Congress found that courts incorrectly 
narrowed the definition of disability and scope of protection under the ADA."^^^ 
As a result, the Act made several changes. Highlights of the Act include: ( 1 ) 
construing disabiUty in favor of broad coverage;"^^^ (2) setting forth specific major 
life activities and the types of bodily functions that are covered under the law;"^^^ 
(3) broadening protection afforded to individuals who are not actually disabled, 
but are "regarded as" being disabled, by clarifying that individuals who are 
"regarded as" having an impairment are protected under the Act regardless of 
whether the impairment limits, or is perceived to limit, a major life activity ;'^^^ (4) 
declaring that the amehorative effects of mitigating measures, except for ordinary 
eyeglasses and contact lenses, should not be considered in determining if 
individuals are disabled;"^^^ (5) indicating that impairments which are episodic or 
in remission are still covered under the ADA if, when active, the impairment 
would substantially limit a major life activity ;'^^° (6) clarifying that reasonable 
accommodation is not required for individuals who are only regarded as being 
disabled;"^^^ and (7) stating that individuals cannot be regarded as disabled for 
only having an impairment that is minor and lasts for six months or less, unless 
impairments that are episodic or in remission."^^^ 

X. Indiana Legislative Update 

A. House Enrolled Act 1001: State Assumption ofHCI Levy 

Property tax reform was one of the primary issues of concern during the 2008 
Indiana legislative session after many Indiana residents saw significant increases 
in their property taxes months before the session began."^^^ To relieve local 
property tax burdens, the Indiana State government elected to assume 
responsibility for the hospital care for the indigent fund, which was traditionally 
funded by a local hospital care for the indigent tax. The State also decided to 
provide a certain level of funding to the Health & Hospital Corporation of 

protect. The scope of the ADA was further narrowed by the Supreme Court in Toyota Motor 
Manufacturing Kentucky, Inc. v. Williams, 534 U.S. 184 (2002), superseded by statute, ADA 
Amendments Act of 208, Pub. L. No. 1 10-325, 122 Stat. 3553. As a result, lower courts incorrectly 
found in individual cases that people with a range of substantially limiting impairments were not 
disabled under the ADA. 

425. 42U.S.C. § 12101. 

426. Id. § 12102. 

427. Id. 

428. Id. 

429. Id. 

430. Id. 

431. Id. § 12201. 

432. Id. § 12102. 

433. Larry DaBoer, The Impact of Property Tax Legislation on Indiana Households, 83 IND. 
Bus. Rev., Spring 2008, at 1, 5. 

1052 INDIANA LAW REVIEW [Vol. 42: 1003 

Marion County, which had also historically been funded by local taxes. These 
changes provided local tax relief while preserving funding for health care to the 

Since 1986, each county has levied a local tax on its residents to fund the 
county hospital care for the indigent fund. Proceeds from the taxes and the fund 
were used to reimburse certain qualified hospitals for uncompensated care they 
provided to a county's indigent residents. House Bill 1001, which was 
subsequently enacted in House Enrolled Act 1001 (HEA 1001), implemented 
comprehensive property tax reform and provides that the state government is 
responsible for adequate funding for the new state hospital care for the indigent 
fund."^^^ The legislation effectively eliminates the local tax that had, since 1986, 
funded indigent health care and shifts the burden of paying these costs to the 
state. Further, HEA 1001 amends the Indiana Code to require the State of 
Indiana to provide $40 million to fund the Health & Hospital Corporation of 
Marion County, which operates Wishard Memorial Hospital and provides a 
substantial amount of indigent care.'^^^ The changes set forth in HEA 1001 , while 
alleviating local tax burdens, also preserve important funding streams to hospitals 
so that they may continue to provide care to the indigent population of Indiana. 

B. Senate Enrolled Act 42: Holding Medicaid Payors Accountable 

The Indiana State Legislature took steps towards holding managed care 
organizations participating in the Indiana Medicaid program (Program) 
accountable for complying with their contracts with the Program. Senate Bill 42, 
enacted as Senate Enrolled Act 42 (SEA 42), requires the Select Joint 
Commission on Medicaid Oversight"^^^ (Commission) "to [d]etermine whether a 
managed care organization that has contracted with the office to provide 
Medicaid services has properly performed the terms of the managed care 
organization's contract with the state.'"^^^ SEA 42 also requires certain managed 
care organizations participating in the Program to: (1) be accredited by the 
National Committee for Quality Assurance within certain timeframes and (2) 
accept electronic claims for payment."^^^ Finally, SEA 42 repeals a provision 
under which the Commission would have expired as of December 31, 2008.'^^^ 
This legislation increases the oversight duties of the Commission so that it may 
scrutinize managed care organizations participating in the Program and ensure 

434. H.B. 1001, 115thGen.Assem.,Reg.Sess.(Ind.2008)(amendinglND.CODE§ 12-16-7.5- 
4.5 (2006 & Supp. 2008)). 

435. Id. 

436. The Commission had been created by the Indiana State Legislature before passage of S.B. 
42 to oversee general Medicaid matters involving claims, errors, reimbursement and other issues 
involving the state Medicaid program. IND. CODE § 2-5-26-8 (2006 & Supp. 2008). 

437. S.B. 42, 115th Gen. Assem., Reg. Sess. (Ind. 2008) (amending iND. CODE § 2-5-26-8 
(2006 & Supp. 2008)). 

438. Id. 

439. Id. 

2009] HEALTH CARE LAW 1053 

that these organizations are complying with the terms of their contracts with the 
Program, preventing future abuses of the Program, and increasing Program 

C. Senate Enrolled Act 350: Community Mental Health Centers 

The Indiana Legislature committed to establish and fund community health 
centers in 2008 by enacting Senate Bill 350 into law.'^'^^ Community health 
centers are federally funded "community-based and patient-directed 
organizations that serve populations with limited access to health care . . . 
[including] . . . low income populations, the uninsured, those with limited 
English proficiency, migrant and seasonal farmworkers, individuals and families 
experiencing homelessness, and those living in public housing.'"^"^' Community 
health centers qualify for federal funding if they meet certain federal 
requirements, but federal funding may not always provide a sufficient level of 
resources to keep community health centers operational. "^"^^ S.B. 350 helps to 
resolve this problem. 

Senate Enrolled Act 350 (SEA 350) requires a county (other than Marion 
County) to transfer money within a specified time frame to the Division of 
Mental Health and Addiction (Division) to satisfy the non-federal share of 
medical assistance payments to community mental health centers for (1) certain 
administrative services and (2) community mental health rehabilitation 
services. "^"^^ It also permits the Health & Hospital Corporation of Marion County 
to make payments to the Division for the operation of a community mental health 
center.'^'^'^ SEA 350 also requires the Division to ensure that the non-federal share 
of funding received from a county is applied only for a county's designated 
community mental health center and specifies the manner in which the Division 
may distribute certain excess state funds. "^"^^ Finally, it provides that the county 
tax levy for community mental health services is allocated for operational 
expenses of community mental health centers and that provisions of the bill are 
applicable only to the extent that the congressional moratorium on the 
implementation of certain rules by the U.S. Secretary of Health and Human 
Services is not extended and other restricted rules are implemented."^"^^ The 
enactment of SEA 350 shows the Indiana State Legislature's dedication to 
indigent care by funding community health centers that offer significant health 
care solutions to this population. 

440. S.B. 350, 1 15th Gen. Assem., Reg. Sess. (Ind. 2008). 

441. Health Resources and Services Administration, The Health Center Program: What Is a 
Health Center?, (last visited July 3, 2009). 

442. 42 C.F.R. § 51c. 101 (2008). 

443. S.B. 350, 1 15th Gen. Assem., Reg. Sess. (Ind. 2008). 

444. Id. 

445. Id. 

446. Id. 

Survey of Recent Developments in Insurance Law 

Richard K. Shoultz* 

During this survey period,^ the Indiana appellate and federal courts addressed 
many cases in the fields of automobile, homeowners, and commercial insurance. 
A large number of decisions focused upon uninsured/underinsured motorist 
coverage. This Article examines the most significant decisions and discusses 
their impact on the field of insurance law.^ 

* Partner, Lewis Wagner, LLP. B.A. 1987, Hanover College; J.D., 1990, Indiana 
University School of Law — Indianapolis. 

1. The survey period for this Article is approximately November 1, 2007 to October 31, 

2. For cases that were decided during the survey period but are not discussed in this Article, 
see Nautilus Insurance Co. v. Reuter, 537 F.3d 733 (7th Cir. 2008) (applying "most intimate 
contacts" test as Indiana's choice of law principle, and concluding that commercial general liability 
insurer did not owe coverage for victims claims of negligent hiring and supervision of insured's 
employees); Carolina Casualty Insurance Co. v. Estate ofStuder, 555 F. Supp. 2d 972 (S.D. Ind. 
2008) (finding that trucking liability insurer did not act in bad faith by interpleading policy limits 
for court to allocate among injured claimants); Economy Premier Assurance Co. v. Wernke, 521 
F. Supp. 2d 852 (S.D. Ind. 2007) (applying intentional acts exclusion in liability policy to exclude 
coverage to insured for striking claimant in the face); Old Republic Insurance Co. v. RLI Insurance 
Co., 887 N.E.2d 1003 (Ind. Ct. App. 2008) (determining priority of insurance coverages available 
to truck driver involved in accident), trans, denied, 2009 Ind. LEXIS 2391 (Ind. Mar. 5, 2009); 
Allstate Insurance Co. v. Fields, 885 N.E.2d 728 (Ind. Ct. App. 2008) (concluding that insurer did 
not breach its duty of good faith to insured when it refused to pay its policy limits when demanded 
by insured), trans, denied, 2009 Ind. LEXIS 31 (Ind. Jan. 15, 2009); General Casualty Insurance 
Co. V. Bright, 885 N.E.2d 56 (Ind. Ct. App. 2008) (holding that policy's one-year limitation of 
action clause did not apply to prohibit insurer's lawsuit against insured to void coverage); Allianz 
Insurance Co. v. Guidant Corp., 884 N.E.2d 405 (Ind. Ct. App. 2008) (addressing a number of 
issues relating to the insurer's duty to defend the insured, including a discussion of the duty when 
an insured possesses a policy deductible or a self-insured retention), trans, denied, 2009 Ind. 
LEXIS 19 (Ind. Jan. 8, 2009); French v. State Farm Fire & Casualty Co., 881 N.E.2d 1031 (Ind. 
Ct. App. 2008) (concluding that insured may be entitled to difference in premium when insurance 
agent may have sold unnecessary insurance to insured); Insuremax Insurance Co. v. Bice, 879 
N.E.2d 1 187 (Ind. Ct. App.) (finding a question of fact existed on insurer's ability to void policy 
because of insured's alleged misrepresentation of accident details), trans, denied, 891 N.E.2d 50 
(Ind. 2008); Billboards "N" Motion, Inc. v. Saunders-Saunders & Assoc, Inc., 879 N.E.2d 1135 
(Ind. Ct. App.) (concluding that insurance agent is not responsible for failing to advise insured on 
type or amount of insurance coverage to obtain absent a special relationship), trans, denied, 891 
N.E.2d 5 1 (Ind. 2008); American Family Mutual Insurance Co. v. Matusiak, 878 N.E.2d 529 (Ind. 
Ct. App. 2007) (addressing whether homeowners insurance policy applied to hail damage claim to 
house that was in process of being sold), trans, denied, 898 N.E.2d 1218 (Ind. 2008); McMurray 
V. Nationwide Mutual Insurance Co., 878 N.E.2d 488 (Ind. Ct. App. 2007) (prorating underinsured 
motorist coverage under two applicable insurance policies), trans, denied, 891 N.E.2d 50 (Ind. 
2008); Spacey v. State Farm Fire & Casualty Co., 878 N.E.2d 297 (Ind. Ct. App. 2007) 
(interpreting ten-day cancellation of policy period in iND. Code § 27-7-12-13 (2004) referenced 

1056 INDIANA LAW REVIEW [Vol. 42: 1055 

I. Automobile Coverage Cases 

A. Courts Address Whether Claims for Emotional Distress Damages 
Constitute ''Bodily Injury " Under Automobile Insurance Policy 

The insurance coverage issue that received the most attention during this 
survey period was whether an insured' s claim for emotional distress satisfied the 
definition of "bodily injury"^ to be entitled to coverage. Indiana's appellate 
courts addressed the issue on three occasions in the context of uninsured or 
underinsured motorist coverage, while another decision addressed it on a liability 
claim. A number of interesting outcomes followed from these decisions. 

In State Farm Mutual Auto Insurance Co. v. Jakupko,^ a father drove an 
automobile with his wife and two children as passengers.^ Unfortunately, the 
family was involved in an automobile accident with an underinsured motorist.^ 
The father was seriously injured in the accident, and the wife and one child 
suffered emotional distress as a result of being in the car and witnessing the 
father's injuries.^ 

The family possessed underinsured motorist insurance coverage with State 
Farm which had limits of $ 100,000 for claims of "each person" and $300,000 for 
"each accident."^ State Farm paid $100,000 to the father to satisfy his claim.^ 
However, State Farm denied the remaining family members' claims seeking an 
additional $200,000 for emotional distress by contending that their claims arose 
from the father's injuries, and were included in the amount paid to satisfy the 
father's claim. ^^ 

The trial court and Indiana Court of Appeals concluded that State Farm's 
interpretation that the family members' claims were included in the father's 

calendar as opposed to business days); Smith v. Auto-Owners Insurance Co. , 877 N.E.2d 1 220 (Ind. 
Ct. App. 2007) (applying a "discovery rule" for determining when an insured should have realized 
that a tortfeasor's insurer became insolvent in order to have an uninsured motorist claim to pursue), 
trans, denied, 891 N.E.2d 43 (Ind. 2008); Vectren Energy Marketing & Service, Inc. v. Executive 
Risk Specialty Insurance Co., 875 N.E.2d 774 (Ind. Ct. App. 2007) (members of a limited liability 
corporation lacked standing to sue corporation's insurer for a coverage declaration). 

3. Most standard insurance policies define "bodily injury" to mean "bodily injury to a 
person and sickness, disease or death which results from it." See, e.g.. State Farm Mut. Auto. Ins. 
Co. V. Jakupko, 881 N.E.2d 654, 656 (Ind. 2008). Indiana's uninsured/underinsured motorist 
statute requires coverage to apply to "bodily injury, sickness or disease." iND. CODE § 27-7-5- 
2(a)(1) (2004). 

4. 881 N.E.2d 656 (Ind. 2008). 

5. Id. at 655. 

6. Id. 
1. Id. 

8. Id. 

9. Id. 
10. Id. 

2009] INSURANCE LAW 1057 

claim contravened Indiana's underinsured motorist statute. ^^ The Indiana 
Supreme Court agreed with the lower courts. ^^ That court first observed that it 
was undisputed that the family members sustained an "impact" from the accident 
such that they could seek to recover for their claims under Indiana law.'^ 

The supreme court also determined that the family members' emotional 
distress claims satisfied the policy and statutory definition of "bodily injury." ^"^ 
Because an emotional distress claim involves "mental anguish," the court 
concluded that this demonstrated a "sickness" under the definition of "bodily 

The court also rejected State Farm's claim that the family members' 
emotional distress claim was included in its payment to the father of the "per 
person" limits. ^^ The court concluded that Indiana's underinsured motorist 
statute prevents State Farm from attempting to limit the family members' claims 
by lumping them together with the father's claim. ^^ Thus, the family members 
were entitled to assert separate per person claims of $100,000 up to the per 
accident limit of $300,000.*^ 

On the same day that the Indiana Supreme Court decided the Jakupko case, 
it also decided Elliott v. Allstate Insurance Co. ^^ Factually, the Elliott case is 
very similar to Jakupko except Elliott involved a mother who was driving a car 
with her sister and daughter as passengers when they had an accident with an 
uninsured motorist.^^ The mother was insured with Allstate, who paid her the 
"each person" uninsured motorist limit of $25,000.^^ The sister and daughter 
sought the remaining $25,000 of "each accident" uninsured motorist coverage 
limits for their emotional distress claims after witnessing the mother's injuries.^^ 

The trial court agreed with Allstate that the passengers' claims were included 
in the payment made to the mother for her claims.^^ The Indiana Court of 
Appeals reversed the trial court by concluding that the emotional distress claims 
of the passengers were entitled to their own separate Umits of liability.^"^ 

The Indiana Supreme Court agreed with the court of appeals. ^^ Referencing 

11. /J. at 661. 

12. Id. 

13. Id. at 656. For analysis of Indiana' slaw on ability to recover emotional distress damages, 
see Shaumber v. Henderson, 579 N.E.2d 452 (Ind. 1991). 

14. Jakupko, 881 N.E.2d at 658. 

15. Id. 

16. /J. at 662. 

17. Id. 

18. Id. 

19. 881 N.E.2d 662 (Ind. 2008). 

20. Id. at 663. 

21. Id. 

22. Id. 

23. Id. 

24. Id. 

25. /J. at 665. 

1058 INDIANA LAW REVIEW [Vol. 42: 1055 

its newly issued decision in Jakupko, the court found that Allstate' s attempt to 
restrict the passengers' claims for uninsured motorist coverage violated Indiana' s 
uninsured motorist statute.^^ 

The decision of State Farm Mutual Automobile Insurance Co. v. D'Angelo^^ 
was the third uninsured/underinsured motorist case addressing emotional distress 
claims. A child bicyclist was seriously injured and eventually died when he was 
struck by an underinsured motorist.^^ The child's mother did not witness the 
crash, but came upon the scene shortly after it happened.^^ The mother attempted 
to lift the vehicle off of the child, and she also observed the emergency personnel 
treating the child.^^ As a result, she suffered from emotional distress. ^^ 

The underinsured motorist' s liability insurer paid its limits of $25,000 for the 
child's wrongful death claim and an additional $25,000 for the mother's claim 
for negligent infliction of emotional distress.^^ The mother then presented an 
underinsured motorist claim to her insurance carrier. State Farm, seeking redress 
for the child's wrongful death and the mother's emotional distress.^^ State Farm 
paid an additional $75,000 for the wrongful death claim to satisfy the $100,000 
policy limit.^"^ However, State Farm denied that the mother possessed an 
underinsured motorist claim under the policy because it believed that she did not 
sustain a separate bodily injury independent of any injury sustained by the 

The trial court granted summary judgment to the mother on her claim by 
finding that State Farm's interpretation of the policy violated Indiana's 
underinsured motorist statute.^^ The Indiana Court of Appeals reversed the trial 
court.^^ The court concluded that the mother's claims for emotional distress 
arose because she witnessed the child' s injuries, not the child' s accident. ^^ Thus, 
her claim arose from the child's bodily injury, and was limited in recovery of 
underinsured motorist benefits to the amount paid to the child for his injury and 

Additionally, such a finding limited the mother' s ability to seek any coverage 
pursuant to the policy's "Each Accident" limit.'^^ Because such additional 

26. Id. at 664; see also IND. CODE § 27-7-5-2(a)(l) (2004). 

27. 875 N.E.2d 789 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 42 (Ind. 2008). 

28. /^. at 791. 

29. Id. 

30. Id. 

31. Id. 

32. Id. 

33. Id. 2X192. 

34. Id. 

35. Id. 

36. Id. at 794-95; see iND. CODE § 27-7-5-2 (2004) (Indiana's underinsured motorist statute). 

37. D' Angela, 875 N.E.2d at 800. 

38. Mat 798. 

39. Id. 

40. See id. 

2009] INSURANCE LAW 1059 

coverage limits applied to a person sustaining a bodily injury while "actually 
involved in the accident," the mother clearly did not qualify as she witnessed the 
post-accident events."^^ The court also concluded that Indiana's underinsured 
motorist statute was not violated by State Farm's policy language."^^ 

The final emotional distress claim involved a third party liability claim, as 
opposed to a first party uninsured/underinsured motorist claim, but it was issued 
on the same date as the Jakupko and Elliott decisions. In State Farm Mutual 
Automobile Insurance Co. v. D.L.B. ex rel. Brake,^^ a young child witnessed his 
cousin being struck and killed by a motorist while they rode their bikes. "^"^ The 
child sustained no personal injury, but did suffer from traumatic stress. "^^ 

At the time of the accident, State Farm insured the motorist.^^ State Farm 
paid its limits to the deceased cousin's parents to settle their claims against the 
motorist."^^ However, State Farm denied the child witness' liability claim for 
emotional distress because he did not sustain "bodily injury" as required by the 

Both the trial court and Indiana Court of Appeals found that the child was 
entitled to pursue a liability claim against the motorist as his claim for emotional 
distress satisfied the definition of "bodily injury" in the motorist's policy."^^ The 
Indiana Supreme Court reversed the two lower courts and concluded that no 
coverage was available for the emotional distress claim.^^ Relying upon its 
decision in Jakupko, the court concluded that because the child sustained no 
impact from the accident, his emotional distress damages did not satisfy the 
definition of "bodily injury," which required some "bodily touching" or impact.^^ 

These cases are very instructive in dealing with emotional distress claims and 
whether they satisfy the definition of "bodily injury" in an insurance policy. The 
cases indicate that emotional distress claims do satisfy the definition if they 
include an impact; however, a bystander who witnesses the accident or comes 
upon the accident shortly after it happens, will not satisfy the definition. 

41. Id. 

42. Id. at 800. It is interesting to observe that the Indiana Supreme Court denied transfer on 
the D 'Angelo decision after it decided Jakupko and Elliott. Thus, it can be argued that the supreme 
court probably recognized a clear distinction in the cases which supports the court of appeals 

43. 881 N.E.2d 665 (Ind. 2008). 

44. Id. Sit 665. 

45. Id. 

46. Id. 

47. Id. 

48. Mat 666. 

49. Id. 

50. Id. 

51. Id.; see also State Farm Mut. Auto. Ins. Co. v. Jakupko, 88 1 N.E.2d 654, 659 (Ind. 2008); 
Wayne Twp. Bd. of Sch. Comm'rs v. Ind. Ins. Co., 650 N.E.2d 1205, 1210 (Ind. Ct. App. 1995). 

1060 INDIANA LAW REVIEW [Vol. 42: 1055 

B. Policy Exclusion for Use of Rental Vehicle Upheld Despite Indiana Statute 
Defining Primary Coverage Responsibility 

An insurance coverage issue that frequently arises focuses upon the primary 
insurance responsibility for vehicle renters involved in accidents. In Safe Auto 
Insurance Co. v. Enterprise Leasing Co.,^^ the insured rented a truck from a 
rental company for an out-of-state trip because the insured believed his vehicle 
was unreliable, and he wanted to transport his motorcycle in a more reliable 
rental truck. ^^ In executing the rental contract, the insured declined to purchase 
the rental company's liability protection for the truck.^"^ 

While the insured was using the truck in a state other than Indiana, he was 
involved in an accident that produced personal injuries to another motorist.^^ At 
the time of the rental, the insured possessed a liability insurance policy with Safe 
Auto.^^ The injured motorist filed a complaint against the insured, and Safe Auto 
hired counsel to defend the insured under a reservation of rights. ^^ The case 
eventually settled for an amount equal to the insured's policy limits with Safe 

Safe Auto filed a declaratory judgment action, contending that it did not owe 
liability coverage to the insured because of an exclusion which stated: 

[Safe Auto] will provide liability coverage for any auto [an insured 
rents] from a car rental agency or garage, ONLY while your covered 
auto is being serviced or repaired, or it if [sic] has been stolen or 

Because the insured's personal automobile was not being repaired and was not 
stolen. Safe Auto argued that its insurance coverage was excluded, and therefore, 
the rental company possessed the insurance coverage obligation. 

The rental company contended that Safe Auto's policy exclusion was 
contrary to an Indiana statute that defined the primary insurance obligation on 
leased vehicles.^^ The statute in question provides: 

When a claim arises from the operation of a motor vehicle leased under 
a written lease agreement, if under the agreement the lessee agrees to 
provide coverage for damage resulting from his operation of the vehicle, 
then the motor vehicle insurance coverage of the lessee is primary. No 


889 N.E.2d 392 (Ind. Ct. App. 2008), reh'g denied. 


Id. at 394. 




Id. at 395. 











2009] INSURANCE LAW 1061 

claim may be made against any coverage available for the vehicle by the 
lessor until the limits of the motor vehicle insurance coverage provided 
by the lessee for the vehicle are exhausted.^ ^ 

The trial court granted the rental company' s motion for summary judgment.^^ On 
appeal, the Indiana Court of Appeals reversed.^^ The court found that there was 
no agreement between the insured and the rental company for the insured to 
provide insurance coverage which was necessary for application of the statute.^"^ 
In fact, the insured testified that he did not expect Safe Auto' s policy to cover the 
rented truck even though he declined to purchase the rental company's 
supplemental insurance.^^ 

The court also commented in dicta that even if the primary insurance statute 
was applicable, it would not invalidate Safe Auto's policy exclusion.^^ Instead, 
the statue clarifies the primary insurance obligation when two applicable policies 
conflict.^^ The court suggested that Indiana's General Assembly, rather than the 
judicial system, was the proper forum for public policy arguments to prevail on 
the validity of Safe Auto's exclusion for coverage of rented vehicles.^^ 

The court's analysis that the statute did not apply appears correct because the 
Safe Auto policy excluded coverage for this particular situation. This decision 
properly enforced the terms of the insurance policy. 

C. Court Refuses to Permit Forced Assignment by Insured of Breach 
of Duty of Good Faith Claim Against Insurer 

When an insured has insufficient insurance coverage to address an injured 
plaintiff's damages, the insured usually is agreeable to assigning to the plaintiff 
any potential claim for breach of duty of good faith by the insurer, in exchange 
for the plaintiff's agreement not to attempt to collect the excess judgment from 
the insured. However, in State Farm Mutual Automobile Insurance Co. v. 
Estep,^^ the insured refused to agree to the assignment.^^ The interesting 
questions addressed in that case focused upon whether the plaintiff could force 
the insured to assign the claim and whether the insurer had a right to intervene 
in the supplemental stage of the lawsuit against the insured. 

The facts revealed that the insured was intoxicated when he struck the 
plaintiff who was riding on a motorcycle.^^ As a result of the impact, plaintiff 

61. IND. Code § 27-8-9-9 (2003). 

62. Enter. Leasing Co., 889 N.E.2d at 395. 

63. Mat 398. 

64. /df. at397. 

65. Id. 

66. Id. 

67. Id. 

68. Id. 

69. 873 N.E.2d 1021 (Ind. 2007). 

70. Id. at 1023. 

71. /J. at 1022n.l. 

1062 INDIANA LAW REVIEW [Vol. 42: 1055 

suffered devastating injuries which ultimately led to the plaintiffs untimely 
death^^ Before his death, the plaintiff filed a lawsuit against the insured^^ The 
insured possessed an insurance policy with bodily injury liability limits of 
$50,000 with State Farrn.^'* State Farm hired defense counsel for the insured, and 
the insured also retained his own personal counsel7^ State Farm repeatedly 
offered the insured's full bodily injury limits to the plaintiff in exchange for a 
release of all claims, but the plaintiff refused all offers/^ 

The case proceeded to trial, and a jury awarded the plaintiff $650,000 in 
compensatory damages and $15,000 in punitive damages7^ State Farm paid the 
plaintiff the $50,000 of bodily injury limits, and the defense counsel it hired to 
defend the insured withdrew from representing the insured^^ The plaintiff 
instituted supplemental proceedings against the insured seeking the remaining 
$615,000 of the jury's award^^ The plaintiff requested that the insured 
voluntarily assign to him any potential bad faith claim against State Farm, but the 
insured refused by contending that there was no justifiable basis to claim that 
State Farm committed a breach of its duty of good faith.^^ 

The plaintiff requested that the court issue an order requiring the insured to 
assign any claim he had against State Farm to the plaintiff.^ ^ When this request 
was made, State Farm was not a party to the proceedings supplemental.^^ Despite 
the insured's objection, the court ordered the insured to assign any potential 
claim it possessed against State Farm to the plaintiff.^^ 

After receiving the forced assignment, the plaintiff filed a separate lawsuit 
against State Farm and the insured's personal counsel in Illinois in an attempt to 
recover the outstanding jury award.^"^ Upon receiving notice of the lawsuit and 
assignment, State Farm moved to intervene in the Indiana litigation and challenge 
the assignment.^^ When the trial court denied both of State Farm's motions. State 
Farm appealed. ^^ 

On appeal, the Indiana Court of Appeals reversed the trial court, and 
concluded that State Farm should have been granted the right to intervene.^^ The 

72. Id. at 1022-23. 

73. /J. at 1023. 

74. Id. 

75. Id. 

76. Id. 
11. Id. 

78. Id. 

79. Id. 

80. Id. 

81. Id. 

82. Id. 

83. Id. 

84. /J. at 1023-24. 

85. Id. at 1024. 

86. Id. 

87. Id. 

2009] INSURANCE LAW 1063 

court of appeals also found that a forced assignment of a potential bad faith claim 
could be made, but only if the court first determined that a viable claim existed.^^ 

The supreme court granted transfer. ^^ That court agreed with the court of 
appeals that State Farm should have been permitted to intervene to challenge the 
assignment.^^ The court also concluded that the forced assignment was improper 
under Indiana law.^^ The court observed that forced assignments of potential bad 
faith claims were contrary to Indiana's Direct Action Rule, which prohibits a 
third party to the insurance contract from bringing a lawsuit directly against an 
insurance company for bad faith or to recover an excess judgment.^^ The court 
also found that allowing such an action would detrimentally change the "'special 
relationship'"^^ that exists between an insured and insurer when a plaintiff sues 
the insured by creating more potential conflicts of interest.^"^ Finally, the court 
found that to permit such a forced action would increase insurance costs to all 
insureds, which includes insureds who found the defense provided by their 
insurance company satisfactory.^^ 

The court also commented upon the fact that State Farm's exposure risk was 
significantly increased beyond any premium paid by the insured if a forced 
assignment was permitted.^^ As demonstrated by this case. State Farm received 
premiums for $50,000 of liability insurance coverage which it provided to its 
insured.^^ To permit a forced assignment. State Farm's potential exposure was 
for the full amount of the judgment against the insured, even though State Farm 
offered its policy limits repeatedly to attempt to settle the case.^^ 

In this case, it appears appropriate that a forced assignment against State 
Farm was not permitted after it repeatedly attempted to settle the case by offering 
its policy limits. However, a potential bad faith claim is an asset^^ of the insured 
that a creditor, such as the plaintiff, should be able to seek in proceedings 
supplemental, even if by forced assignment. If forced assignments are allowed. 

88. Id. 

89. Id. at 1028. 

90. Id. at 1024 n.6. The Indiana Supreme Court determined, however, that State Farm should 
have been permitted to intervene pursuant to Indiana Trial Rule 24(B) ("permissive intervention") 
as opposed to the court of appeals' conclusion that intervention was as a matter of right under 
Indiana Trial Rule 24(A). Estep, 873 N.E.2d at 1024 n.6 (citing IND. TRIAL R. 24). 

91. £5f^/7, 873 N.E.2d at 1027. 

92. Id. ; see also Menefee v. Schurr, 75 1 N.E.2d 757, 760-61 (Ind. Ct. App. 2001) (discussing 
the Direct Action Rule). 

93. Estep, 873 N.E.2d at 1026 (quoting Menefee, 751 N.E.2d at 760). 

94. Mat 1027. 

95. Id. 

96. Id. 

97. Id. 

98. Mat 1027-28. 

99. Id. at 1025 ("The common law in most states today, including Indiana, teaches that any 
choice in action that survives the death of the assignor may be assigned."). 

1064 INDIANA LAW REVIEW [Vol. 42: 1055 

they could lead to the practical problems that the court outlined. ^^^ It will be 
interesting to see if this issue is revisited at some point in the future. 

D. Comparison of Underinsured Motorist Coverage Limits to Tortfeasor's 
Bodily Injury Liability Limits Results in Finding of No Coverage 

The decision in Progressive Halcyon Insurance Co. v. Petty^^^ offers a good 
analysis of how courts compare limits of a tortfeasor's liability coverage with an 
insured's policy to determine if underinsured motorist (UIM) coverage applies. 
Autumn Petty (Autumn) was driving a vehicle along the interstate with her 
brother, Michael Petty (Michael), as a passenger. *^^ Another motorist. Sears, 
crossed the median of the interstate, and collided with Autumn' s vehicle, causing 
personal injuries to both Autumn and Michael. ^^^ Autumn filed a lawsuit against 
Sears and her UIM insurer. Progressive, to recover for personal injuries from the 
accident. ^^ Michael, also a party to the lawsuit, similarly made a claim against 
Sears and Progressive.*^^ 

Sears possessed a liability insurance policy that provided limits of $50,000 
per person and $50,000 per accident. *°^ The Progressive policy contained UIM 
limits of $50,000 per person and $50,000 per accident. *^^ Sears' insurer 
interpleaded its full limits of $50,000 into the court in exchange for release of all 
claims against Sears. *^^ Autumn and Michael agreed to divide Sears' limits, with 
Autumn receiving $15,000 and Michael receiving $35,000.*^^ 

In response to Autumn's and Michael's UIM claim. Progressive contended 
that no coverage was available.**^ Relying upon a number of recent appellate 
decisions,*** Progressive argued that because the UIM "per accident" limits of 
Autumn's policy were identical to Sears' bodily injury liability limits. Sears was 
not an UIM under its policy.**^ 

100. See id. at 1027-28. 

101. 883 N.E.2d 854 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1217 (Ind. 2008). 

102. /J. at 855. 

103. Id. 

104. Id. 

105. Id. 

106. Id. 

107. Id. 

108. Id. 

109. Id. 

110. /^. at 856. 

HI. For the cases Progressive relied on, see Auto-Owners Insurance Co. v. Eakle, 869 N.E.2d 
1244 (Ind. Ct. App. 2007), trans, denied, 878 N.E.2d 218 (Ind. 2008); Grange Insurance Co. v. 
Graham, 843 N.E.2d 597 (Ind. Ct. App. 2006); Allstate Insurance Co. v. Sanders, 644 N.E.2d 884 
(Ind. Ct. App. 1994). 

1 12. Petty, 883 N.E.2d at 855; see iND. CODE § 27-7-5-4(b) (2004) (defining "underinsured 
motor vehicle" as including "an insured motor vehicle where the limits of coverage available for 
payment to the insured under all bodily injury liability policies covering persons liable to the 

2009] INSURANCE LAW 1065 

The trial court granted Autumn's and Michael's Motions for Summary 
Judgment, and denied Progressive's Motion for Summary Judgment. ^^^ 
However, on appeal, the appellate court reversed, holding that summary 
judgment should be granted to Progressive. ^^"^ 

In concluding that no UIM coverage was available, the court compared the 
per accident limits of Sears' liability policy with the Progressive UIM limits. ^^^ 
Because Autumn and Michael recovered the same total amount as they would 
recover if Sears was uninsured — $50,000 — Sears did not meet the definition of 
UIM.^^^ According to the court, if the per accident limits are identical, then no 
UIM exposure remains. ^^^ 

The court also rejected Michael's argument that because he and Autumn 
individually received less than $50,000 per person, they received less than the 
minimum per person limits of the UIM coverage as required by Indiana law,^^^ 
and thus. Sears should be considered an UIM.^^^ The court found that the 
statute's reference to $50,000 was a ''per accident ^ rather than a ''per person'' 
minimum coverage requirement. ^^^ The court also determined that insureds may 
not trigger UIM coverage by agreeing to accept a figure from the tortfeasor that 
may be less than the per person or per accident limits. ^^^ 

n. Commercial Cases 

A. Court Allows Insurance Company to Take Multiple Examinations 

Under Oath of Insured 

In National Athletic Sportswear, Inc. v. Westfield Insurance Co.}^^ the 
insured sustained a loss when an intruder broke into its building and stole 
business equipment. ^^^ The insured submitted a claim to its insurer, Westfield 
Insurance Company (Westfield), who sought to examine an insured's 
representative about the loss.^^"^ 

insured are less than the Umits for the insured's underinsured motorist coverage at the time of the 

113. Peffy, 883 N.E.2d at 856. 

114. Mat 865. 

115. /J. at 863. 

116. Id. 

117. Mat 858-59. 

118. See IND. Code § 27-7-5-2(a) (2004). 

119. Petty, 883 N.E.2d at 863-65 (rejecting Michael's argument). Michael's brief cited 
Indiana Code section 27-7-5-2(a) in support of his assertion. See id. at 863. 

120. Id. at 864. 

121. Id. 

122. 528 F.3d 508 (7th Cir. 2008). 

123. Mat 513. 

124. Id. 

1066 INDIANA LAW REVIEW [Vol. 42: 1055 

The examination of the insured's owner lasted seven to eight hours. ^^^ After 
the examination, Westfield's attorney sent a letter to the insured's attorney 
requesting copies of certain documents and indicating that a second examination 
would need to be scheduled after receipt of the documentation. ^^^ The insured 
supplied a large number of documents to satisfy Westfield' s document request. ^^^ 

The insured obtained new counsel who notified Westfield' s attorney that the 
owner of the insured would not be made available for a second examination by 
Westfield' s attorney. ^^^ The insured claimed that it had cooperated with 
Westfield by giving the long first examination and supplying the documents that 
Westfield requested. ^^^ Westfield' s attorney responded by referencing the policy, 
which authorized Westfield to undertake the examinations. ^^^ The insured filed 
a lawsuit against Westfield, and the parties continued to dispute whether 
Westfield was permitted to conduct a second examination of the insured's 



The district court concluded that the insured's refusal to be available for a 
second examination constituted a breach of the insurance policy. ^^^ As a result, 
the district court granted Westfield' s Motion for Summary Judgment. ^^^ While 
the court agreed with the insured's argument that, as a matter of contract, a 
"reasonableness" element existed in determining the length and number of 
examinations that an insurer could conduct, the court held that a second 
examination following the initial lengthy examination was not unreasonable. ^^"^ 
While the court observed that an insurer cannot harass an insured by use of the 
examination, the court also observed that the policy granted a great amount of 
latitude to an insurer in the scope and length of the examinations.*^^ 

The Seventh Circuit Court of Appeals completely adopted the district court' s 
opinion. '^^ This decision is very helpful to practitioners who conduct 
examinations under oath. The decision offers support to insurers to extensively 
question insureds on suspicious claims. *^^ Insureds may face long and multiple 

125. Mat 5 14. 

126. Id. 
111. Id. 

128. Id. 

129. Id. 

1 30. Id. The policy language provided that Westfield "may examine any insured under oath, 
while not in the presence of any other insured and at such times as may be reasonably required, 
about any matter relating to this insurance or the claim, including an insured's books and records." 
/t/. at 513. 

131. Mat 511. 

132. Mat 522. 

133. Id. at 524. The court also granted Westfield summary judgment on the insured's claim 
for breach of duty of good faith. Id. 

134. Mat 519-21. 

135. Mat 522. 

136. M. at 510. 

137. See id. at 522. 

2009] INSURANCE LAW 1067 

exams in complicated cases, and this case permits insurers to proceed pursuant 
to the insurance policy. ^^^ 

B. Court Narrowly Interprets Lease Clause Requiring Tenant to 
Insured/Landlord for Personal Injury Events 

Liberty Mutual Insurance Co. v. Michigan Mutual Insurance Co.^^^ 
addressed a common occurrence in landlord/tenant lease agreements. Duke 
Realty Corporation (Duke) was a landlord at a commercial business complex, 
renting space to its tenant, Trilithic, Inc. (Trilithic).^'^^ Pursuant to the lease 
agreement, Duke retained responsibility for snow and ice removal from common 
areas, including a pathway from Trilithic' s employee parking lot.^"^^ A Trilithic 
employee sustained personal injuries when she slipped on snow and ice while 
walking along this pathway on her way to work at Trilithic. ^"^^ 

The employee sued Duke to recover for her personal injuries. ^"^^ Under the 
lease, Trilithic was required to obtain liability insurance to cover both it and 
Duke from public liability and property damage. ^"^"^ Trilithic purchased a liability 
policy from Michigan Mutual Insurance Company (Michigan), which included 
an additional insured endorsement naming Duke as an additional insured with the 
following pertinent language: "WHO IS AN INSURED (Section H) is amended 
to include as an insured the person or organization shown in the Schedule but 
only with respect to liability arising out of the ownership, maintenance or use of 
that part of the premises leased to you and shown in the Schedule." ^"^^ 

Pursuant to this provision, Duke tendered the defense and indemnity 
obligation for the employee's lawsuit to Michigan, who rejected the tender. '"^^ 
Duke's own liability insurer. Liberty Mutual Insurance Company (Liberty), 
provided a defense, and eventually settled the employee's lawsuit. ^"^^ Liberty 
brought a lawsuit against Michigan to recover its cost for the defense and 
indemnity afforded to Duke, and Michigan counterclaimed to establish that no 
coverage was owed.^^^ Eventually, Michigan received summary judgment from 
the trial court, which established that no coverage was owed to Duke, and an 

138. See id. at 522-24. 

139. 891 N.E.2d 99 (Ind. Ct. App. 2008) 

140. Id. at 100. 

141. Id. 

142. Id. 

143. Id. 

144. Id. 

145. Id. 

146. Id. 

147. /J. at 100-01. 

148. /J. at 101 . Specifically, Duke brought an action against Mutual, but Michigan requested 
that the trial court substitute Liberty for Duke as the real party in interest. Id. Duke's counsel 
acknowledged that Liberty was the proper subrogee of Duke. Id. Therefore, the trial court granted 
Michigan's request to substitute liberty for Duke. Id. 

1068 INDIANA LAW REVIEW [Vol. 42: 1055 

appeal ensued. ^"^^ 

Liberty argued that although the fall occurred outside of the premises leased 
to Trilithic, Duke's liability still arose out of Trilithic's use of the leased 
premises as the injured employee was reporting to work when the accident 
happened. ^^^ The Indiana Court of Appeals disagreed with this broad 
interpretation of the "arising out of language of the additional insured 
endorsement.'^^ Instead, the court held that in order for coverage to be triggered 
under the additional insured endorsement, "more than an incidental connection 
with the leased premises" was necessary.'^^ Because the employee's fall did not 
happen on a part of the leased premises, the court found that the connection 
between the accident and the leased premises was insufficient to support a 
finding of coverage. '^^ 

This decision involves a very narrow interpretation of the "arising out of 
language in many insurance policies. The court clearly believed that the fact the 
employee was on her way to work at the time of the accident was only an 
"isolated connection" and insufficient to find coverage. '^"^ 

C Supreme Court Determines that Statute of Limitations for Alleged 
Insurance Agent Negligence Occurs When Insured Could Have 
Discovered Omission in Coverage Through Ordinary Diligence 

In Filip V. Block,^^^ the Indiana Supreme Court offered very instructive 
guidance on the accrual date for the running of the statute of limitations on 
negligence claims against insurance agents. The insureds purchased an 
apartment building in 1998.'^^ In 1999, they met with an insurance agent who 
had served as agent for the previous owner. '^^ The insureds requested that the 
agent provide "the same coverage" as the previous owner possessed, and the 
agent arranged a commercial general liability policy with similar coverage as 
possessed by the previous owner. '^^ 

The insureds moved into one of the apartment units and rented out the 
others. '^^ The agent apparently knew that the insureds were living in the 
apartment building; however, the agent did not provide coverage for the insureds' 
personal property, nor did she acquire a separate tenant's policy for the 

149. Id. 

150. Id. at 103. 

151. Mat 103-05. 

152. Id. at 104. 

153. Id at 105. 

154. Id. 

155. 879 N.E.2d 1076 (Ind. 2008), reh'g denied. 

156. Mat 1078-79. 

157. Id. at 1079. 

158. Id. 

159. Id. 

2009] INSURANCE LAW 1069 

insureds. ^^^ The insureds contended that the agent told them that they would ''be 
covered" for losses. ^^^ The insureds also made a number of changes to the policy 
after its inception due to change in circumstances. ^^^ 

In 2003, a fire destroyed the apartment building and the insured's personal 
property. ^^^ At that point, the insureds contended that they first discovered their 
uninsured exposure for their personal property when the insurance company 
denied coverage. ^^"^ The insureds filed suit against the agent. ^^^ The agent 
responded to the complaint and filed a motion for summary judgment, which the 
trial court granted on the basis that the two year statute of limitations barred the 
complaint. ^^^ 

The supreme court observed four possible dates that the statute of limitations 
period could begin — "the date of coverage, the date of the loss, the date of the 
[insurance company's] denial of the claim, [or] the date the insured leam[ed] or 
should in the exercise of reasonable care have learned of the coverage 
problems."^^^ The court concluded that the insureds' claim for the agent's 
alleged negligent procurement of the wrong insurance coverage accrued at the 
time the policy was issued as the failure to provide correct insurance was 
discoverable through the exercise of ordinary diligence. *^^ 

The court rejected the insureds' argument that they were unaware of the lack 
of insurance until the actual loss occurred. ^^^ The court succinctly observed: 

[I]nsurance is about the shifting of risk. The [insureds] bore the risk of 
loss from the date the policy was issued, so their injury from the alleged 
negligence occurred at this point. Although the extent of damages was 
unknown within the statute of limitations, the full extent of damages 

need not be known to give rise to a cause of action Presumably, no 

litigation would have been necessary to correct their policy and pay the 
adjusted premium for the desired coverage before the fire, but if for any 
reason the coverage was no longer available the [insureds] could have 
asserted their negligence claim if they felt that necessary. Further, if we 
accept the [insureds' ] argument, then insureds become free riders, paying 
lower premiums, perhaps for many years, and then retaining the ability 

160. Id. 

161. Id. 

162. Id. 

163. Id. 

164. Id. 

165. Id. Interestingly, the opinion is silent on the exact date the lawsuit was filed. It appears 
it was filed within two years of the date of loss, but over two years from the date of the policy's 

166. Id.', see IND. CODE § 34-11-2-4 (2008) (providing the requisite two-year limitation 

167. Filip, 879 N.E.2d at 1082. 

168. Id. 

169. Id. at 1083-84 

1070 INDIANA LAW REVIEW [Vol. 42: 1055 

to claim the benefit of higher coverage if a loss is incurred. ^^^ 

Because the agent's alleged failure to insure could have been discovered by 
the insured from a review of the policy, the court concluded that the statute of 
limitations began to accrue when the policy was issued. ^^^ As a result, the agent 
was entitled to summary judgment as the insureds' claim was time-barred. ^^^ 
This decision is helpful to practitioners in providing a clearer understanding of 
the date for the beginning of the running of a statute of limitations for alleged 
insurance agent negligence claims. 

170. Id. (citation omitted). 

171. /d at 1084. 

172. Id. The court also addressed the appropriate manner for parties to provide evidence 
designation in briefing motions for summary judgment. Id. at 1080. Specifically, the court held 
that a party is free to designate evidence in the party's motion, memorandum of law, a separate 
filing or by appendix so long as it is done consistently. Id. at 1081. 


Recent Developments in 
Intellectual Property Law 

Christopher A. Brown* 

In the relevant time-frame, federal and state courts issued several opinions 
affecting various parts of intellectual property law. Cases concerning fee-shifting 
in copyright litigation, the extent of patent misuse and exhaustion doctrines, 
analysis of noncompetition agreements under Indiana law, and trademark 
analysis under Seventh Circuit jurisprudence are among the cases reviewed 

I. Quanta Computer, Inc. v. LG Electronics, Inc.^ 

In this opinion, the U.S. Supreme Court considered the "longstanding 
doctrine of patent exhaustion"^ in the context of patented methods involving 
computer technology. The opinion overturns a Federal Circuit opinion on two 
points, holding (1) that the doctrine applies to method patents and (2) that the 
appellate court's view of a license agreement was incorrect, resulting in 
exhaustion of the patent rights at issue. ^ 

Patent exhaustion refers to the concept that once a patented item has been 
sold by or under the authorization of the patent owner, any patent rights (i.e. the 
right to exclude others from making, using, selling, offering for sale, or 
importing) are exhausted/(9r that itemf' Once the patent owner has given consent 
for that specific item, or has received payment from its sale, then it has passed 
out of the exclusionary rights embodied by the patent.^ To use a particular 
example, the sale by Camera Corporation of one of its patented cameras means 
that it cannot thereafter prevent others from using or selling that particular 
camera. The Court gave a brief history of the doctrine and ended by citing its 
case that held that an exhaustion exists "following the sale of an item . . . when 
the item sufficiently embodies the patent — even if it does not completely practice 
the patent — such that its only and intended use is to be finished under the terms 
of the patent."^ 

In the Quanta case, respondent LG Electronics (LG) licensed a set of patents 
to Intel Corporation (Intel), permitting Intel to "make, use, sell (directly or 
indirectly), offer to sell, import or otherwise dispose of products that practice 
technology in the licensed patents.^ A limitation in the license stipulated that no 

* Partner, Woodard Emhardt Moriarty McNett & Henry LLP, Indianapolis; J.D., summa 
cum laude, 1996, Indiana University School of Law — Indianapolis. 

1. 128S.Ct. 2109(2008). 

2. Mat 21 15. 

3. Mat2113, 2117, 2121-22. 

4. Mat 21 15. 

5. See id. at 21 18. "[W]hen a patented item is 'once lawfully made and sold, there is no 
restriction on [its] user (quoting Adams v. Burke, 84 U.S. 453, 457 (1873)). 

6. Mat 21 17. 

7. Id. at 2114. 

1072 INDIANA LAW REVIEW [Vol. 42: 1071 

license was granted to third parties for a combination of a product covered by the 
hcense and other items acquired from other sources.^ In other words, the parties 
wanted to keep any sale of additional components to be combined with the 
licensed products among themselves. Nonetheless, the license also mentioned 
that it would not "alter the effect of patent exhaustion that would otherwise 
apply" to sale of the licensed products.^ Intel agreed in a separate document that 
it would notify its customers that a hcense did not extend to a combination of a 
licensed product and a non-Intel product. ^^ 

When Quanta Computer (Quanta) purchased Intel products, with the notice 
from Intel about license limits, and combined them with other devices so as to be 
within the coverage of LG's patents, LG sued.^^ The district court initially 
granted summary judgment to Quanta based on patent exhaustion. ^^ It found that 
the products Intel sold Quanta (legitimately under the LG license) had "no 
reasonable non-infringing use," so that Intel's proper sale of them used up LG's 
right of exclusion under the patents. ^^ A later order limited the summary 
judgment to apparatus claims, and held that patent exhaustion did not apply to 
process claims. ^"^ On appeal, the Federal Circuit agreed that the exhaustion 
doctrine did not apply to processes, but also held that the LG/Intel license did not 
allow Intel to sell its products to Quanta for use with non-Intel devices. ^^ 

After reviewing the naissance of the concept of patent exhaustion, the Court 
repeated the basic rule of the doctrine: "'[T]he right to vend [the patented item] 
is exhausted by a single, unconditional sale, the article sold being thereby carried 
outside the monopoly of the patent law and rendered free of every restriction 
which the vendor may attempt to put upon it.'"^^ It further noted the 1942 
opinion in United States v. Univis Lens Co.}^ an antitrust case that somewhat 
broadened the rule.'^ In Univis, Univis licensed another company to make 
eyeglass-lens blanks and to sell those blanks at a fixed price to others for 
finishing into lenses covered by Univis patents. ^^ Even though the patent claims 
for finished lenses were practiced in part by Univis licensees, the Court held that 
exhaustion applied to the sale of the blanks: 

[W]here one has sold an uncompleted article which, because it embodies 

8. Id. 

9. Id. 

10. Id. 

11. Id 

12. Mat 21 14-15. 

13. /£/. at2115. 

14. Id. 

15. Id. 

16. Id. at 21 16 (quoting Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 

17. 316 U.S. 241 (1942). 

18. Quanta, 128 S. Ct. at 2116-17. 

19. [/mvw, 316 U.S. at 243-44. 


essential features of his patented invention, is within the protection of his 
patent, and has destined the article to be finished by the purchaser in 
conformity to the patent, he has sold his invention so far as it is or may 
be embodied in that particular article. ^^ 

Thus, exhaustion can apply if a patent owner sells a product which is not itself 
covered by the patent, when the "only and intended use" of such product is to be 
finished and, thereby, come within the patent's claims.^^ 

As to whether the exhaustion doctrine applied to method claims at all, the 
Court found no reason not to apply the doctrine. ^^ Even though methods cannot 
be sold in the way products or devices can, there is precedent for exhausting 
method patents via the sale of something that "embodied" the method.^^ Further, 
a blanket rule keeping method claims out of the reach of the doctrine would 
provide a back door to keep apparatus away from exhaustion, insofar as most or 
all patents could include a claim to a method with the device.^'^ 

Having determined that exhaustion could apply to method claims, the Court 
turned to the parameters of applying it. Following Univis, the Court first 
discussed whether the Intel products at issue were capable only of use in 
practicing the patent.^^ No reasonable use for the products outside of 
combination into something that would practice LG's patented subject matter 
was of record, and the goal of Intel's sales to Quanta appeared to be Quanta's use 
in computers that would practice that subject matter.^^ The Court also considered 
whether Intel' s products included essential features of the patented invention and 
concluded that they do and, in fact, "all but completely practice the patent."^^ 

The Court reviewed LG's arguments attempting to distinguish Univis but 
rejected them.^^ Notably, LG's position that exhaustion of one patent does not 
indicate exhaustion of another generally found agreement with the Court.^^ 
However, the Court then noted that a device that practices one patent ''while 
substantially embodying'' another patent suggests that both patents' rights could 
be exhausted by the sale of the device.^^ "The relevant consideration is whether 
the Intel Products that partially practice a patent — by, for example, embodying 
its essential features — exhaust that patent."^ ^ 

Exhaustion arises from an authorized sale, and so the Court turned to the 

20. Mat 250-51. 

21. Quanta, 128 S. Ct. at 2117. 

22. Id. 

23. Id. 

24. /^. at 21 17-18. 

25. Mat 21 18. 

26. Mat 2118-21. 

27. M. at 2120. 

28. Id. 

29. Id. 

30. Id. 

31. M. at 2121. 

1074 INDIANA LAW REVIEW [Vol. 42: 1071 

license itself to see if Intel' s sale to Quanta was properly authorized. Because the 
license itself permitted Intel to make, use, and sell products covered by LG's 
patents, and the notice provision was not breached by Intel or a condition of the 
license, Intel's sales to Quanta were within the license.^^ Indeed, the Court noted 
that "[n]o conditions limited Intel's authority to sell products substantially 
embodying the patents" at issue.^^ The argument that Quanta had no "implied 
license" to use Intel's products as it did had no bearing because exhaustion was 
the issue, not any theory of license to Quanta.^"^ In the end, the Court held that 
LG could not assert its patent rights against Quanta and reversed the Federal 
Circuit. ^^ 

There are two items of principal interest in this opinion. First, the Court has 
removed any doubt as to whether the exhaustion doctrine applies to patent rights 
for processes or methods. ^^ Even so, it would appear in most cases that the 
doctrine will not often arise outside of the context of some product or device. 
The nature of methods simply does not permit one to trace a particular method 
in commerce, unlike individual articles, which can be traced. Nonetheless, it is 
clear that in an appropriate case, the sale of a product or composition of matter 
could exhaust not only a claim to that apparatus or composition, but also a claim 
to the methods involved.^^ 

Second, whether a sale can exhaust a product patent claim or a method patent 
claim is not a mutually-exclusive question. The Court clearly rejected the idea 
that exhaustion based on the sale of one product can only affect one patent.^^ 
With the formulation of the exhaustion doctrine given in LG, it is possible for the 
sale of a product plainly within the apparatus claims of one patent to exhaust 
method claims of another patent, so long as the product has no reasonable other 
use than in such methods and it has essential feature(s) of the method. Patent 
practitioners recognize the commonness of prosecuting claims to a device itself 
in one patent application and claims to a method of making or using that or a 
similar device in another. While the hurdle of "no reasonable other use" may be 
quite a high bar to clear, a strategy of separating method from device both in 
patents and in licensing may backfire on the patent owner unless thought through 
very carefully. Similarly, a licensee or its customers may have an exhaustion 
defense against multiple patents, even though a license refers only to one patent. 

32. /J. at 2121-22. 

33. /J. at 2122. 

34. Id. 

35. Id. 

36. Id. at 2118 (rejecting the argument "that method claims, as a category, are never 

37. See id. (noting that methods claims "as a category" are not excluded) (emphasis added). 

38. Mat 2120-21. 


n. Top Tobacco, LP. v. North Atlantic Operating Co?"^ 

Although this case does not provide a great deal of substantive trademark law 
for Indiana and Seventh Circuit practitioners, it is interesting at least for its 
common-sense approach and discussion by Chief Judge Easterbrook. Top 
Tobacco sued North Atlantic and National Tobacco Co. for infringement of its 
registered trademark "TOP" as used on loose or ''roll-your-own" tobacco."^^ 
Following a summary judgment in the defendants' favor, Top Tobacco 

The first line of the opinion sets the tone and perhaps provides an 
overarching principle for deciding whether a trademark lawsuit is warranted: 
"This case illustrates the power of pictures. One glance is enough to decide the 
appeal.'"^^ In fact, there is little more analysis in the opinion, and one wonders 
whether a request for attorney fees and/or Rule 11 -type sanctions would have 
been granted."^^ 

Essentially, the opinion gives pictures of the accused product's labeling and 
that of the plaintiff's product's labeling and finds it "next to impossible to 
believe that any consumer, however careless, would confuse these products. '"^^ 
The court adverted to the lack of evidence from the plaintiff, such as a survey or 
customer affidavits in noting that "the pictures are all we have.'"^^ Focusing on 
that lack of evidence, the opinion accused Top Tobacco of asking the court "to 
ignore the pictures and the lack of any reason to believe that anyone ever has 
been befuddled.'"^^ The court noted the multi-factor test for likelihood of 
confusion given in prior cases and gives examples of such f actors. "^^ In the end, 
however, the court effectively passed over the factors: "A list of factors designed 
as proxies for the likelihood of confusion can't supersede the statutory inquiry. 
If we know for sure that consumers are not confused about a product's origin, 
there is no need to consult even a single proxy.'"^^ Thus, absent significant 
evidence — such as surveys or affidavits — and absent an analysis of traditional 
confusion-related factors, the comparison of the products as they are actually sold 
was sufficient for the court to reach the ultimate legal conclusion of no likelihood 
of confusion."^^ 

This was certainly an efficient (and to this author's mind, correct) resolution 
of the case. Perhaps this case is the exception that proves the rule, as the one 


509 F.3d 380 (7th Cir. 2007). 


/^. at 381. 


Id. at 382-83. 


/J. at 381. 


See Fed. R. Civ. P. 1 1(c) (providing 

sanctions for 




Top Tobacco, 509 F.3d at 382-83. 


Id. at 383. 









1076 INDIANA LAW REVIEW [Vol. 42: 1071 

case that is so clear that significant analysis is unnecessary. If so, the court might 
have levied sanctions on the plaintiff or at least provided a sentence or two of 
caution as a "word to the wise" for other attorneys. 

On the other hand, the opinion seems to move too quickly past the 
fundamentals of the federal trademark statute. It is granted that the labels of the 
respective products are quite different, and the defendants use of the word "top" 
was arguably descriptive.^^ Nevertheless, infringement of a federally-registered 
trademark is not limited to a side-by-side comparison. Rather, the statute 
provides liability for unauthorized use in commerce of "[a]ny reproduction, 
counterfeit, copy, or colorable imitation of a registered mark in connection with 
the sale, offering for sale, distribution, or advertising of any goods or services on 
or in connection with which such use is likely to cause confusion, or to cause 
mistake, or to deceive."^ ^ A comparison of how the alleged infringer uses a word 
or phrase with how the mark's owner uses it is not the test set forth in the statute. 
Rather, the alleged infringer's actual use is compared to the registration to see 
whether the use is "likely to cause confusion."^^ 

Further, there are numerous cases which advise to consider marks "in light 
of what happens in the marketplace," not "merely by looking at the two marks 
side-by-side."^^ To depend so heavily on a side-by-side comparison in this case 
seems to undercut the directions in these earlier opinions not to rely on such 
comparisons. In that light, the lack of evidence proffered by the plaintiff to 
support its claims is particularly important. Had the plaintiff provided significant 
evidence, then a broader analysis of the likelihood of confusion might have been 
necessary. Perhaps the lesson is that the registration itself can only get the 
plaintiff so far, even though it is evidence of the plaintiff's usage and its rights. 
Without further evidence as to the market and usages of the respective marks to 
back up the registration, the thousand words provided by a picture alone could 
flatten a case from the start. 

in. AutoZone, Inc. v. Strick^"^ 

In contrast to the Top Tobacco opinion noted above,^^ in Strick, the Seventh 
Circuit reversed a summary judgment granted in favor of a trademark 
defendant.^^ Plaintiff AutoZone is a national retailer of automotive products, but 
AutoZone does not provide automobile maintenance or repair services.^^ The 

50. See id. at 381 (noting that "top" has any number of meanings including to "mean the 

51. 15 U.S.C. § 1114(l)(a) (2006). 

52. Id. 

53. See, e.g., Ty, Inc. v. Jones Group, Inc., 237 F.3d 891, 898-99 (7th Cir. 2001) (internal 
quotation omitted). 

54. 543 F.3d 923 (7th Cir. 2008). 

55. See supra Part II. 

56. Strick, 543 F.3d at 926. 

57. Id 


record also showed that AutoZone had used its "AutoZone" trademark across the 
country since 1987 and had made substantial marketing and advertising efforts 
in the Chicago area from at least the mid-1990s.^^ Strick opened two businesses 
in that geographic area under the names of "Oil Zone" and "Wash Zone," which 
provided maintenance services such as quick oil changes and car washes. ^^ 

While AutoZone became aware of and investigated Strick' s businesses in late 
1998, AutoZone took no action until it contacted Strick in early 2003; it then 
filed suit under federal and state theories in November 2003.^^ In a summary 
judgment motion, Strick asked for judgment based on a lack of a likelihood of 
confusion and on AutoZone' s four-year delay in filing suit — laches.^* The 
district court granted the motion, finding that the marks were "not similar 
enough" for a trier of fact to find a likelihood of confusion, but the court did not 
reach the laches issue.^^ 

Writing for his co-panelists. Judges Ripple and Tinder, Judge Manion first 
restated the seven factors considered in this circuit in a determination of whether 
confusion is likely: 

(1) the similarity between the marks in appearance and suggestion; (2) 
the similarity of the products; (3) the area and manner of concurrent use; 
(4) the degree and care likely to be exercised by consumers; (5) the 
strength of the plaintiff's mark; (6) any actual confusion; and (7) the 
intent of the defendant to "palm off his product as that of another.^^ 

While the similarity of the marks, the intent of the defendant and any actual 
confusion are "usually . . . particularly important," the weight of each factor may 
vary according to the facts of record.^"^ As a question of fact, the likelihood of 
confusion issue can be determined summarily "'if the evidence is so one-sided 
that there can be no doubt'" of the answer.^^ 

The opinion went on to discuss each of the factors except for actual 
confusion.^^ As to the marks themselves, the court considered the "prominent 
similarities" between them — namely, the presence of "zone," and the size, font 
and slant patterns within each mark — "may very well lead a consumer" to believe 

58. Mat 927. 

59. Id. 

60. Id. at 928. 

61. Id. 

62. Mat 928-29. 

63. M. at 929. 

64. Id.; see also supra Part II (discussing the Top Tobacco case). The overall question is 
confusion in the marketplace, and so it is the factor(s) addressing most directly that question that 
are most important. See Strick, 543 F.3d at 929 (noting that confusion "is ultimately a question of 

65. Strick, 543 F.3d at 929 (quoting Packman v. Chi. Trib. Co., 267 F.3d 628, 637 (7th Cir. 

66. Mat 929-34. 

1078 INDIANA LAW REVIEW [Vol. 42: 1071 

that "Oil Zone" and "Wash Zone" could be AutoZone-affiliated businesses.^^ 
The court distinguished A iz/c^Zon^ Inc. v. Tandy Corp.,^^ concerning "AutoZone" 
and Radio Shack's use of POWERZONE,^^ in which the Sixth Circuit found the 
marks not likely to be confused at least in part based on features and uses of the 
marks in addition to the difference between "power" and "auto" in them7^ In 
Strick, the court saw such features and uses as being potential similarities, rather 
than the differences noted in the Sixth Circuit opinion, leaving open questions for 
afinder of fact7^ 

Similarly, the court decided that a reasonable consumer might believe that 
Oil Zone or Wash Zone are "spinoffs" of AutoZone based on a relationship 
between oil change or car wash services and products used in changing oil or 
washing cars7^ The Sixth Circuit's decision in Tandy Corp. was also less 
relevant in this context because the record showed hardly any overlap in the 
kinds of products sold, and so customers looking for one type of product were 
unlikely to go to the other store in search of it7^ 

The court also concluded that a fact-finder could see commonalities in 
geographic usage and customer base, that the degree of care exercised by 
consumers might be relatively low, and that the strength of AutoZone' s mark was 
significant.^"^ The court further noted Strick's experience in his industry and the 
possibility of inferring an intent by the defendant to confuse consumers as to the 
similarity between the marks where one has "attained great notoriety."^^ All of 
these factors could be applied in the plaintiff's favor, said the court, further 
leading away from summary judgment.^^ 

This case is not especially notable for particular pronouncements of law or 
treatment of a case, except in comparison with the relative abruptness of the Top 
Tobacco opinion. AutoZone conveys a much more usual, or standard, way of 
analyzing a trademark case, albeit in the context of a summary judgment motion. 
The court considered the "likelihood of confusion" question indirectly by 
analyzing the seven listed factors against the background of actual market 
conditions and consumer behavior.^^ The conclusions drawn from those factors 
lead to the legal conclusion of whether confusion is likely. Top Tobacco starts 
with the same question — whether a likelihood of confusion exists — but suggests 
that in some cases that question can essentially be directly answered.^^ In a broad 

67. Id. at 930. 

68. 2004 FED App. 0200P, 373 F.3d 786 (6th Cir.). 

69. StricK 543 F.3d at 930-3 1 . 

70. Tandy Corp., 2>1?>¥.M 2X196. 

71. 5mc^, 543F.3dat931. 

72. Id. 

73. /J. at 932. 

74. /J. at 932-33. 

75. /J. at 934. 

76. Id. at 935. 

77. See id. ?X929-2>A. 

78. Top Tobacco, L.P. v. N. Atl. Operating Co., 509 F.3d 380, 381-83 (7th Cir. 2007). 


sense, the opinion provided that two trademarks can be so different (or perhaps 
so similar) in the context of the actual marketplace that the likelihood of 
confusion is immediately determinable.^^ Of course, the context of Top Tobacco 
also included products and consumer groups that were identical,^^ and so perhaps 
a more traditional factor analysis was implicitly performed in that case. A 
practitioner should prepare his or her trademark case with all of the appropriate 
Seventh Circuit factors for likelihood of confusion in mind. Nevertheless, Top 
Tobacco suggests that a proper case will permit "short-circuiting" an indirect 
approach in favor of a direct consideration of whether confusion is likely. 

rv. County Materials Corp. v. Allan Block Corp}^ 

In this opinion, the Seventh Circuit Court of Appeals found itself at the 
intersection of the law of patent misuse and a covenant not to compete.^^ The 
parties' dispute centered on a production agreement in which County Materials 
Corporation (County) was authorized to manufacture Allan Block Corporation' s 
(Allan) patented concrete block, and in which County agreed not to sell 
competing products for a period after expiration of the agreement or if County 
stopped making the patented product.^^ Despite that language, after the 
agreement was terminated County did not wait the required period before 
offering a competing and non-infringing product.^"^ 

County took the position that the covenant not to compete was against the 
policy of the patent laws. It termed the inclusion of the covenant in the 
agreement "misuse" by Allan.^^ In its view, Allan used leverage from its patent 
rights to obtain something to which it was not otherwise entitled, namely an 
eighteen-month freedom from competition against County concerning products 
not covered by Allan's patent.^^ The district court granted summary judgment 
against County, and the Seventh Circuit affirmed on appeal. ^^ 

Before it could attend to the substance of the appeal, the court explained why 
this dispute's patent law-related issues were properly before the Seventh Circuit, 
and not before the Federal Circuit Court of Appeals. Federal Circuit jurisdiction 
obtains where '"a well-pleaded complaint estabhshes either that federal patent 
law creates the cause of action or that the plaintiff's right to relief necessarily 
depends on resolution of a substantial question of federal patent law, in that 
patent law is a necessary element of one of the well-pleaded claims."^^ The court 

79. Id, 

80. See id. at 382. 

81. 502 F.3d 730 (7th Cir. 2007), cert, denied, 128 S. Ct. 1709 (2008). 

82. Id. at 732-33. 

83. Mat 733. 

84. Id 

85. Id. 

86. Id. at 733, 735-37. 

87. Mat 732-33. 

88. Id. at 733 (quoting Christiansen v. Colt Indus. Operating Corp., 486 U.S. 800, 809 

1080 INDIANA LAW REVIEW [Vol. 42: 1071 

viewed the complaint as raising questions of enforceability of a license 
agreement,^^ and considered the case to parallel that of Scheiber v. Dolby 
Laboratories, Inc.^^ With that principal issue in mind, and jurisdiction over the 
case having apparently been based exclusively on diversity, the court determined 
that it had the proper appellate jurisdiction.^' 

On the merits, the court considered briefly whether the covenant might fit 
into a "per se" concept of misuse. The court noted that the infringement statute 
states that refusal to license a patent is not misuse, nor is conditioning a license 
on acquiring a license to another patent or buying a separate product, unless the 
patentee has market power.^^ Other examples of "per se" misuse come from the 
common law, and include '"arrangements in which a patentee effectively extends 
the term of its patent by requiring post-expiration royalties. '"^^ In brushing past 
these legal standards, the court took the view that they exemplified the general 
disfavor or rejection of the view of patent misuse put forward by County.^"^ The 
covenant not to compete did not reach these standards. ^^ 

Beyond a "per se" view, the court looked to see whether the circumstances 
surrounding the covenant evidenced "'the effect of extending the patentee's 
statutory [patent] rights . . . with an anti-competitive effect. '"^^ If so, then the 
court needed to conduct a rule of reason analysis to see if the covenant "'imposes 
an unreasonable restraint on competition.'"^^ After reviewing relevant 
authorities, the court reasoned that to get past summary judgment, "evidence 
tending to show an adverse effect in an economically sound relevant market is 
essential for [such a] . . . rule of reason" -based action.^^ 

The court saw no evidence of abuse by Allan in the agreement.^^ Rather, the 
court understood that the terms of the agreement gave County substantial benefits 
in exchange for royalties and efforts to exploit Allan's patent. '^^ In the court's 
view, the value provided by Allan in terms of services could have sufficed for the 
covenant not to compete. '°' The facts of record did not show that Allan "needed 
or used any kind of leverage made possible by the patent" to get the covenant. '^^ 
In fact, the court went on to opine that the covenant was not "particularly 


89. /J. at 733-34. 

90. 293 F.3d 1014 (7th Cir. 2002). 

91. County Materials, 502 F.3d at 734 (citing 28 U.S.C. §§ 41, 1291 (2006)). 

92. Id. at 734 (citing 35 U.S.C. § 271(d) (2006)). 

93. Id. (quoting Va. Panel Corp. v. MAC Panel Co., 133 F.3d 860, 869 (Fed. Cir. 1997)). 

94. /^. at 734-35. 

95. Id.2Xl2>5. 

96. Id. (quoting Va. Panel Corp., 133 F.3d at 869). 

97. Id. (quoting Va. Panel Corp., 133 F.3d at 869). 

98. Mat 736. 

99. /^. at 736-37. 

100. Id. ax 731. 

101. Id. 

102. Id. 


onerous."^^^ The consideration of the covenant itself and its minimal or non- 
existent effect on competition in the relevant market and geographical area 
further supported the court's dismissal of the patent misuse defense. ^^ 

This opinion, although not from the Federal Circuit, seems to confirm a 
general view that a misuse defense to a patent case will need a showing akin to 
an antitrust case. The easy scenario is where the patent owner has created a 
scheme to keep royalties flowing past the expiration of a patent. Otherwise, a 
misuse defense will require evidence of market power along with tying of another 
product to the patent rights, and/or evidence of a restraint on competition that is 
unreasonable in light of the conditions of the relevant market. It may be that the 
circumstances surrounding the negotiation or entering of a license are indicative 
of a degree of market power held by the patentee, but without some evidence of 
such power or an unreasonable restraining of a market, a patent misuse defense 
may not make it to trial. 

V. Patriot Homes, Inc. v. Forest River Housing, Inc. 


In Patriot Homes, the Seventh Circuit Court of Appeals considered a 
preliminary injunction issued against Forest River Housing on issues of copyright 
and trademark infringement and trade secret misappropriation. '^^ The suit arose 
out of allegations that Forest River's subsidiary. Sterling, and a group of its 
employees — who formerly were Patriot Homes employees — had taken Patriot 
modular home designs. ^^'^ Once Sterling distributed sales materials showing the 
designs. Patriot sued under a variety of theories. *^^ 

Defending against a preliminary injunction motion. Sterling argued that all 
of the alleged confidential or trade secret information was in fact readily 
available or ascertainable, and thus. Sterling could properly use the 
information. ^^^ Specifically, Sterling noted that modular home manufacturers 
must submit a substantial range of information to state agencies in order to obtain 
approval for sale.^^^ After the prehminary injunction hearing, Sterling made 
Freedom of Information Act requests to three states for the documents submitted 
by Patriot as part of its approval submission, and in response the states sent 
thousands of documents, none of which were marked confidential.*^' While 
Patriot contended that all of that material was proprietary and confidential. 
Sterling maintained that only a relatively small amount of particular categories 

103. Id. 

104. Id. 

105. 512 F.3d 412 (7th Cir. 2008). 

106. Mat 413. 

107. Id. 

108. Id. 

109. Id. 

110. Mat 414. 

111. Id. 

1082 INDIANA LAW REVIEW [Vol. 42: 107 1 

of information was not in the materials obtained from the states. '^^ 

The district court issued a preliminary injunction broadly forbidding Sterling 
from actions with "Patriot's copyrights, confidential information, trade secrets, 
or computer files."^^^ While Sterling apparently did not object to a prohibition 
on use of computer files, it argued on appeal that the remainder of the injunction 
was too vague. ^^"^ The Seventh Circuit agreed. ^'^ 

After discussing basic principles concerning vagueness of injunctions, the 
court rejected the injunction because it did not specify what was included in the 
"trade secrets" or "confidential information." ^^^ The court noted thai American 
Can Co. V. Mansukhani^^^ rejected an injunction entered "without determining 
whether the defendant's [products] were in fact substantially derived from 
plaintiffs trade secrets."'*^ The court flatly denied Patriot's argument that the 
court was not required to identify all elements of copyright originality or trade 
secret protection in the injunction. ^'^ On the contrary, the court recognized 
difficulty in "ascertain [ing] what information is a trade secret or confidential at 
this stage of the proceedings, [but] the district court still must make this 
determination in order to clearly delineate Sterling's responsibilities pursuant to 
the inj unction." '^^ 

While at first glance this opinion would appear to place a relatively high 
burden on Seventh Circuit district courts in fashioning injunctions in a trade 
secret or similar case, this author takes the view that the determinations required 
are nothing more than the usual indication of whether a likelihood of success 
exists on the merits at trial. As part of any trade secret preliminary injunction 
proceeding, the plaintiff will have to provide sufficient evidence of: (1) the 
existence of a trade secret and (2) the misappropriation of it to establish a 
likelihood of success. If convinced of the likelihood that trade secrets exist and 
will be misappropriated, then the court can incorporate the definition of the trade 
secret material — at least that information demonstrated as likely to be a trade 
secret at a hearing — into the injunction. What this opinion most directly says is 
that in order to issue an injunction, the district court must at least make a 
concrete finding of whether particular information is likely to be a trade secret. ^^* 
Without a specification of what information the enjoined party cannot use, an 
injunction will be too vague. 

112. Id. 

113. Id. 

114. Id. 

1 15. Id at 416 (citing Fed. R. Civ. P. 65(d)). 

116. Mat 415-16. 

1 17. 742 F.2d 314 (7th Cir. 1984). 

118. Patriot Homes, 512 F.3d at 415 (citing American Can, 742 F.2d at 326). 

1 19. Id. (citing American Can, 742 F.2d at 332). 

120. Id. 

121. Seeid.2iiA\5-\6. 


VI. Riviera Distributors, Inc. v. Jones^^^ 

This Seventh Circuit opinion examined an award of attorney fees in a 
copyright case.^^^ Chief Judge Easterbrook' s opinion is short, but provides an 
eye-opening view of fee-shifting in the copyright context. 

The federal Copyright Act provides that a court can "award a reasonable 
attorney's fee to the prevailing party as part of the costs" of an action. ^^"^ The 
"prevailing party" can be either plaintiff or defendant — no statutory presumption 
exists favoring one over the other. ^^^ Under Seventh Circuit precedent, "the 
prevaiUng party in copyright litigation is presumptively entitled to reimbursement 
of its attorneys' fees."^^^ 

The question of what constitutes "prevailing" remains. Without question, a 
party who wins a verdict after trial is the prevailing party. In Riviera, however, 
the parties never went to trial. ^^^ Instead, the suit had been dismissed by Riviera 
well after the time had run for a voluntary dismissal without prejudice, with 
Riviera admitting that it could not prove its claim at that time.*^^ The district 
court dismissed the case with prejudice.^^^ The trial court rejected the 
defendants' request for attorney's fees, however, because in its view they had not 
prevailed on the merits. *^^ Without findings concerning the underlying substance 
of the case, the district court did not believe the defendants to be entitled to 
"prevailing party status."^^^ 

The Seventh Circuit rejected the view that whether one "prevails" depends 
on the content of a judge's opinion.'^^ Instead, relying on Supreme Court 
precedent concerning other areas of law, the court considered that any judgment 
in a party's favor brings about a "material alteration of the[ir] legal relationship," 
and means that the party prevails. ^^^ Even in a consent judgment context, where 
the parties admit no liability and the judge makes no independent findings, a 
party still prevails, according the Seventh Circuit. ^^"^ The fact that the judge made 
no findings did not make the defendants less of a prevailing party. ^^^ A "win" is 
all that is required to be given prevailing party status. 

122. 517 F.3d 926 (7th Cir. 2008). 

123. /fif. at 927-28. 

124. 17 U.S.C. § 505 (2006). 

125. Riviera Distribs., 517 F.3d at 928 (citing Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994)). 

126. Id. 

127. Id. at 927. 

128. Id. 

129. Id. 

130. Mat 928. 

131. Id. 

132. Id. 

133. Id. (quoting Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human 
Res., 532 U.S. 598, 604 (2001)). 

134. Id. 

135. Id. 

1084 INDIANA LAW REVIEW [Vol. 42: 1071 

The court moved on to consider whether it was appropriate "not to honor the 
presumption that the prevailing party, plaintiff <9r defendant, recovers attorneys' 
fees."^^^ The court identified three potential factors against honoring the 
presumption: (1) defendants' failed motion to dismiss the complaint, (2) 
defendants' abandonment of mediation, and (3) defendants' delay in responding 
to discovery. '^^ The court dismissed the first two factors, claiming that a failed 
motion to dismiss is a "common step" and "not a good reason" to withhold fees, 
and that a party is entitled to adjudication and is not required to mediate. ^^^ As 
to the last factor, the court considered that discovery delay might warrant a 
reduction, but not an elimination of fees for the prevailing party. ^^^ 

The court also considered the history between the parties. Given the 
acrimony between them, and the existence of a prior suit for substantially the 
same cause that was settled with an agreement to submit materials to an 
independent expert for analysis, the court found the case to be "an especially 
good candidate for fee shifting." ^"^^ While it was not clear as to whether the 
district court considered that expert-resolution agreement to be of consequence, 
the Seventh Circuit found it to be highly relevant. ^"^^ Referring to Omni Tech 
Corp. V. MFC Solutions Sales, LLC,^"^^ the court stated that an agreement for 
alternative dispute resolution must be enforced if valid under appropriate state 
contract law.'"^^ The prior settlement provided for alternative resolution, and so 
plaintiffs in this case "came to the wrong forum." '"^"^ Defendants were forced to 
spend attorney's fees despite the agreement to avoid them, and their win entitled 
them to those fees, including fees incurred on appeal. '"^^ 

vn. Eagle Services Corp. v. H20 Industrial Services, Inc. 


This case also concerned an award of attorneys' fees in a copyright case won 
by a defendant. ^^^ After four of Eagle Services Corporation's (Eagle) employees 
left to set up defendant H20 Industrial Services, Inc. (H20), Eagle sued for 
infringement of copyright in its safety manual that the employees had taken with 
them.^"^^ Eagle verified that H20 had the manual and had made copies, but 
apparently, H20 later made its own manual, and no prospective customers other 

136. Id. 

137. /rf. at 928-29. 

138. Mat 929. 

139. Id. 

140. Id. 

141. Id. 

142. 432 F.3d 797 (7th Cir. 2005) 

143. Riviera Distribs., 517 F.3d at 929. 

144. Id. 

145. /^. at 929-30. 

146. 532 F.3d 620 (7th Cir. 2008). 

147. Id. at 62\. 

148. Id. at 622. 


than Eagle employees posing as customers had seen the copies. ^"^^ Despite H20 
apparently obtaining no business from or in the presence of the copies, Eagle 
claimed restitution of H20's profits made prior to creating its own manual, 
insofar as H20 could not provide services without a manual under applicable 
regulations. ^^^ Eagle admitted that statutory damages were not available. ^^^ 

After Eagle presented its case, H20 won a motion for judgment for lack of 
evidence that the applicable regulations in fact required a manual. ^^^ The district 
court did not award fees to the defendant, finding that Eagle's suit was not 
frivolous or in bad faith, and further noted that *'the standards for what the parties 
call an 'indirect profits' suit are vague."^^^ 

Judge Posner wrote that the district court was "wrong on all three counts, but 
even if it had been right it would not have been justified in refusing to award 
fees."^^"^ The Seventh Circuit considered the suit frivolous not only because its 
theory was not borne out by the regulations it relied on, but also apparently 
because of the relative ease of the task of creating a manual. ^^^ Since Eagle was 
suing for damages, but had no ground for obtaining such a judgment, ''the fact 
that his rights may have been violated does not save his suit from being adjudged 

In light of that judgment, the court found H20 entitled to fees "[u]nder any 
standard we know for shifting attorney's fees from a losing plaintiff to a winning 
defendant." ^^^ The court noted that plaintiffs and defendants are to be treated 
alike in the copyright scheme of shifting fees, and repeated its view that the 
presumption for an award of fees is very strong in the case of a prevailing 
defendant. ^^^ 

The opinion took a moment to consider the Sixth Circuit's view that a 
plaintiff's presentation of '"colorable, albeit meritless, claims'" do not entitle a 
defendant to an award of attorney fees.^^^ The use of a standard akin to that of 
an employment discrimination case, in the Seventh Circuit's view, misses special 
characteristics of a copyright or other intellectual property case.^^^ In particular, 
the court noted that a successful defendant in most copyright cases enlarges the 
public domain (insofar as it is established that no copyright exists or rights are 










Id. at 623. 




Id. at 623-24. 


Mat 623. 


Id. at 624. 




Id. at 624-25 (quoting Murray Hill Publ'ns, Inc. v. ABC Commc'ns, Inc., 2001 FHD App. 

0295P, 264 F.3d 622, 640 (6th Cir.)). 


Mat 625. 

1086 INDIANA LAW REVIEW [Vol. 42: 107 1 

limited in some fashion) and, therefore, benefits the public. '^^ It is quite evident 
from both Riviera Distributors and Eagle Services, copyright fee-shifting cases, 
that a plaintiff in the Seventh Circuit should tread carefully, as a loss of any kind 
will put him or her on the defensive on the issue of attorney fees. 

VIE. AGS Capital Corp. v. Product Action International, LLC^^^ 

This Indiana Court of Appeals opinion addresses a question of first 
impression — whether Indiana's trade secret statute pre-empts a claim under the 
racketeer-influenced corrupt organizations (RICO) laws.*^^ The opinion lists in 
great detail the actions of several individuals employed by defendant Fast Tek 
Group, LLC (Fast Tek) who obtained information from Product Action 
International (Product Action). ^^ The information was useful to Fast Tek in 
getting up to speed and in competition quickly after the company's formation. ^^^ 
As part of its suit. Product Action made claims under both Indiana's enactment 
of the Uniform Trade Secrets Act, and under its RICO statute. ^^^ Fast Tek and 
the other appellants argued that the Trade Secrets Act, which "'displaces all 
conflicting law of this state pertaining to the misappropriation of trade secrets, 
except contract law and criminal law,'''^^^ pre-empted application of RICO civil 
remedies in the present case.^^^ 

The court looked first to Infinity Products, Inc. v. Quandt^^^ for guidance on 
applying the pre-emption provision of the Trade Secret Act.^^^ Quandt 
considered the common law concept of respondeat superior in connection with 
the requirement of the Act that a defendant know or have reason to know that a 
trade secret was acquired improperly. ^^^ The Quandt court noted the legislative 
history of the pre-emption provision calling the Indiana provision "stronger" than 
a similar provision in the Uniform Trade Secrets Act in existence at the time the 
General Assembly adopted the provision. ^^^ Nevertheless, while acknowledging 
the Act's non-displacement of the criminal law, Quandt left open the question of 
whether civil remedies provisions arising from criminal acts were pre-empted. ^^^ 

The court of appeals tackled this question in AGS by focusing on the 

161. Id. 

162. 884 N.E.2d 294 (Ind. Ct. App.), trans, denied, 898 N.E.2d 1222 (Ind. 2008). 

163. Mat 306. 

164. Mat 300-03. 

165. Mat 299-303. 

166. M. at 299, 303. 

1 67. Id. at 306 (quoting Ind. Code § 24-2-3- 1 (c) (2007)) (emphasis added) (footnote omitted). 

168. Id. 

169. 810 N.E.2d 1028 (Ind. 2004). 

170. AGS, 884 N.E.2d at 306-07. 

171. Quandt, 810 N.E.2d at 1029, 1033-34; see also I^fD. CODE § 24-2-3-2 (2007) (defining 

172. Quandt, 810 N.E.2d at 1033. 

173. Id. at 1033 n.4. 


difference between the pre-emption provision as enacted by the General 
Assembly and the then-existing pre-emption provision in the uniform act. ^^"^ The 
latter specified that the uniform act would displace "'conflicting tort . . . and 
other law of this State'" that provides civil remedies for trade secret 
misappropriation.'^^ The court emphasized that focus on remedies and noted in 
contrast that Indiana's provision refers to the area of criminal law as a whole, so 
that "the criminal law and its concomitant criminal remedies" are exempt from 
this provision of the Indiana Trade Secret Act.'^^ 

Turning then to an analysis of the nature of the RICO action, the court 
focused on the defendant' s "predicate acts" that had to be proven, which included 
"various types of criminal activity" such as receiving stolen property.' ''^ Multiple 
offenses can fall into the category of "corrupt business influence," which 
supports additional criminal liability. '^^ In the court's words, over and above 
"criminal law sanctions for such activities," there is "a private right of action 
against such corrupt business influences." '^^ The court viewed these provisions 
as having the "common goal" of deterring "egregious and schematic criminal 
activity." '^^ Because the civil remedy is "derivative of the criminal law," the 
court ruled that a RICO claim based on corruption in the form of "acquisition of 
economically valuable information through . . . artifice" is not pre-empted by the 
Indiana Trade Secrets Act.'^' 

Thus, the court took the position that the use of "criminal law" in the Trade 
Secrets Act's pre-emption provision is broad enough to encompass any action 
arising from conduct defined to be criminal, even if the action itself is in civil 
court. '^^ That position is consistent with the idea that the exception from pre- 
emption in the provision is broader than in the uniform act, and so more subject 
matter falls outside of pre-emption. Nevertheless, it seems somewhat 
counterintuitive to call what is clearly a civil action, giving a right of action to 
affected non-law-enforcement parties, a part of the criminal law. The AGS court 
made no secret of its disgust for defendants' conduct noted in the findings from 
the preliminary injunction hearing, and it seems likely that such a feeling 
influenced the outcome on the pre-emption question. '^^ Perhaps the result for 
this and similar questions is dependent on whether the focus is on preventing 
conduct that is detrimental to the public, versus redressing damage or providing 
restitution from an act or series of acts. 

174. AG5, 884 N.E.2d at 307-09. 

175. Id. at 307 (quoting Unif. Trade Secrets Act § 7 (amended 1985)). 

176. /J. at 308. 

177. Id. 

178. Id.; see also IND. CODE § 34-24-2-6 (2008) (providing an action for injunctive relief and 
damages from "corrupt business influence"). 

179. AGS, 884 N.E.2d at 308 (citing Ind. Code § 34-24-2-6 (2008)). 

180. Id. 

181. /J. at 308. 

182. /J. at 308-09. 

183. See id. at 300-05 (noting the extensive bad acts by defendants). 

1088 INDIANA LAW REVIEW [Vol. 42: 1071 

IX. Central Indiana Podiatry, P.C. v. Krueger^^"^ 

In the realm of non-competition agreements, the Indiana Supreme Court 
handed down an opinion addressing the specific situation of a physician leaving 
his or her medical practice, and the interpretation and effect of a noncompetition 
agreement between the physician and the practice. ^^^ Defendant Krueger was a 
podiatrist who had been employed by Central Indiana Podiatry (CIP) under a 
succession of employment agreements, each having restrictions on his activities 
following termination. ^^^ These restrictions included, for a period of two years 
after leaving CIP, (1) contacting patients to provide podiatry services, (2) 
soliciting CIP employees, and (3) practicing podiatry within fourteen central 
Indiana counties, any other county in which CIP maintained an office, and any 
county "adjacent" to those counties. '^^ The counties included in that practice- 
restriction provision covered, in the court's words, "essentially the middle half 
of the state."*'' 

At various points, Krueger worked at offices in five counties, and during 
2005, when Krueger was terminated, he was working at an office on the north 
side of Marion County, as well as in offices in Tippecanoe County and Howard 
County.*'^ About two months after his termination, Krueger agreed to practice 
podiatry with Meridian Health Group, P.C. in Hamilton County, at an office 
Krueger characterized in a mailing as about ten minutes away from the CIP office 
in northern Marion County at which Krueger worked. *^^ 

CIP sued for injunctive relief against Krueger and Meridian, but the trial 
court found the geographic restriction in the Krueger/CIP employment agreement 
to be unenforceable.*^* After the court of appeals reversed that ruling, the 
supreme court granted transfer to review the restriction.*^^ The court found this 
case to present a matter of public interest capable of repetition, and so, even 
though any possible injunction had been mooted by the passage of time, it chose 
to address the matter. *^^ 

Krueger raised four issues for the court to consider, two of which were 
treated at some length. The first of these was whether his non-competition 
agreement was void as against public policy as interfering with physician/patient 
relationships.*^"* The court saw a significant difference between the general case 

184. 882 N.E.2d 723 (Ind. 2008). 

185. Mat 725-26. 

186. /J. at 725. 

187. /J. at 725-26. 

188. Id. at 726. 

189. Id. 

190. Id. 

191. Id. 

192. Id. 

193. Id. 2X126-21. 

194. /J. at 727. 


(considering that many times a non-competition agreement "affects only the 
interests of the employee and employer") and the physician-specific case, which 
"involves other considerations as well."^^^ These considerations naturally 
centered on "the patients' legitimate interest in selecting the physician of their 
choice," based typically in confidence in the physician, and the fact that patients 
typically have "direct contact" with the physician at the latter' s office. ^^^ There 
is no question that the physician/patient relationship is, and has long been, 
considered a special relationship, deserving of particular handling. However, the 
court's general characterizations of other scenarios for non-competition 
agreements seem to give short shrift to the interests of third parties who have 
developed comfortable relationships based in trust with salespersons, business 
consultants, or a variety of other employees. While it is granted that such 
relationships may not merit the sorts of protections given to those between 
doctors and their patients, arguments similar to Krueger's in this case can be 
made with respect to other business fields. 

Even so, the court was not persuaded by the relationship arguments Krueger 
advanced, nor by examples from other jurisdictions, preferring not to extend 
itself beyond existing Indiana precedent. ^^^ The Colorado, '^^ Delaware, *^^ and 
Massachusetts^^^ statutory elimination of non-competition agreements involving 
physicians, and the Tennessee Supreme Court's 2005 holding that such 
agreements are against public policy (relying on an American Medical 
Association ethics opinion discouraging such agreements),^^^ were not sufficient 
to cause the court to find for Krueger on this ground.^^^ Instead, the court chose 
shelter in Raymundo v. Hammond Clinic Ass'n?^^ The court noted that 
Raymundo had been decided at a time when the AMA's ethics opinion was in 
place, and reasoned that it rejected a blanket prohibition on physicians' non- 
competition agreements as it adopted a reasonableness standard for such 
agreements. ^^"^ The court went on to say that Raymundo was consistent with a 
majority of other jurisdictions, including a 2006 opinion from the Illinois 
Supreme Court.^^^ Following its discussion of the viability of Raymundo, the 
court noted that the legislature has not taken any steps on the issue, and left the 

195. Id. 

196. Id. 

197. Id.atllS. 

198. Colo. Rev. Stat. Ann. § 8-2-1 13(3) (West 2007). 

199. Del. Code Ann. tit. 6, § 2707 (2005). 

200. Mass. Gen. Laws Ann. ch. 1 12, § 12X (West 2003). 

201. Murfreesboro Med. Clinic, P.A. v. Udom, 166 S.W.3d 674, 684 (Tenn. 2005). 

202. Cent. Ind. Podiatry, 882 N.E.2d at 728. 

203. 449 N.E.2d 276 (Ind. 1983). 

204. Cent. Ind. Podiatry, 882 N.E.2d at 728. 

205. Id. (citing Mohanty v. St. John Heart Clinic, S.C, 866 N.E.2d 85, 95 (111. 2006); 
Ferdinand S. Tinio, Annotation, Validity and Construction of Contractual Restrictions on Right 
of Medical Practitioner to Practice, Incident to Employment Agreement, 62 A.L.R.3d 1014 §§ 6-25 

1090 INDIANA LAW REVIEW [Vol. 42: 107 1 

proverbial ball in the legislature's court.^^^ 

The second issue focused on reasonableness, and was the basis on which the 
court found the geographic scope of the non-competition agreement to be too 
broad.^^^ The reasonableness analysis followed the standard themes in this area 
of the law — the disfavored nature of non-competition agreements and the 
employer's burden of demonstrating a legitimate interest protected by the 
agreement and the agreement's reasonableness as to the duration of restriction, 
activities and geographical scope.^^^ The court agreed with the appellate opinion 
that CIP's goal of protecting its patient population and preventing its loss in 
income was sufficient to serve "the legitimate interest of preserving patient 
relationships developed with CIP resources. "^^^ That finding provides something 
of a blueprint for drafters of non-competition provisions in the medical field as 
to evidence of what the Indiana Supreme Court believes will support a non- 
competition provision. 

Where CIP's provision failed, however, was in its geographical scope. 
Starting from the premise that such scope is a function of the employer's 
protected interest, the court noted that the only such interest involved in this case 
was development of a "patient base."^^° Given that interest, the court looked to 
the locations in which that investment coincided with Krueger' s work.^' ^ Where 
the noncompetition provision is "justified by the employer's development of 
patient relationships," the court limited the geographic scope to that in which the 
physician has had patient contact.^ ^^ Without any evidence that Krueger used 
CIP's resources to develop patient relationships for CIP in a number of the 
counties ostensibly covered in the employment agreement, the court found the 
agreement to be overbroad.^ ^^ Since "blue-penciling" allows removal of 
provisions, but not rewriting of the agreement, the three counties in which it was 
proven Krueger worked within the relevant period were the only counties in 
which the noncompetition agreement would be enforced.^^"^ The majority opinion 
considered all of contiguous counties to be too broad — even if parts of other 
counties adjacent to Marion County might have some economic overlap, it could 
not be said that the entire contiguous county would have such overlap.^ ^^ 

One other argument Krueger made bears some review. He argued that a prior 
material breach of the employment agreement by CIP had occurred, and thus, the 
noncompetition agreement was not enforceable.^^^ The court considered the 

206. Id. 

207. See id. at 12^-31. 

208. Mat 728-29. 

209. /^. at 729. 

210. /J. at 730. 

211. Id. (citing Tinio, supra note 205, §§ 18-20). 

212. Id. 

213. Id. 

214. Mat 731. 

215. Id. 

216. Mat 731-32. 


alleged breach to be "arguably immaterial in the context of the entire 
agreement.^^^ Of particular interest, the court looked to the "no-defense" 
provision of the agreement, which stated that the noncompetition agreement 

shall be construed as independent of any other provision . . . and shall 
survive the termination of this Contract. The existence of any claim or 
cause of action of [Krueger] against [CIP], whether predicated on this 
Contract or otherwise, shall not constitute a defense to the enforcement 
by [CIP] of this Restrictive Covenant.^^^ 

The court found sparse authority from other jurisdictions on the enforceability 
of such provisions, but what authority it found upheld them "even in the face of 
apparently major breaches by the employer."^ ^^ The court did not explicitly 
approve that authority, and it left open the question of whether there is some 
employer breach that would "override" such a provision.^^^ 

Clearly, this case is instructive not only for its authority arising from the 
Indiana Supreme Court, but also for its requirement of a very direct correlation 
between the employer's protectible interest and the restrictions — in time, 
geography, and otherwise — in a noncompetition agreement.^^^ It is well known 
that such restrictive provisions must be carefully drafted if they are to be upheld. 
Central Indiana Podiatry does not merely repeat that caveat, but spells out the 
kind of restriction that can be sustained.^^^ Had the geographic restriction been 
prepared in terms of miles from Krueger' s workplaces, or in units smaller than 
counties, the scope of the noncompetition provision might have been 
significantly greater. The court appeared receptive to considering geographic 
area in terms of economic influence or effect, and so a provision defining 
geographic scope in those terms might have been upheld. Even so, there is some 
logical disconnect in including all of Marion County in the injunction area 
because of work at a location in the far north of that county, while excluding all 
of Hamilton County, even those parts reasonably economically linked. 

The restrictive use of the "blue pencil" doctrine is notable as well. The 
Indiana Supreme Court very clearly considered that doctrine as usable to exclude 
language from an agreement, and not merely to limit it.^^^ One could imagine 
that a legitimate limitation of the agreement would have been to define a smaller 
geographic region that was a part of the original region as the geographic scope 

217. /J. at 732. 

218. Id. 

219. Id. 

220. Id. 

221. Mat 730. 

222. See id. at 730-31 (noting that where the noncompetition provision is "justified by the 
employer's development of patient relationships [, it] must be limited to the area in which the 
physician has had patient contact" and that economic bonds between counties, or likelihood of 
patient travel across county lines was not sufficient). 

223. Mat 730. 

1092 INDIANA LAW REVIEW [Vol. 42: 1071 

of the agreement.^^^ Such a result would not have been an enlargement to the 
employee's detriment, and could have accomplished the aims of the law 
concerning noncompetition agreements. Nonetheless, the court viewed its ability 
to limit the geographical region as only in striking material out of the agreement. 
CIP's definition of territory in terms of counties meant that counties were either 
in or out — no in-between possibility exists under this court's conception of the 
blue-pencil doctrine. 

224. Id. ("[T]he court may apply the blue pencil doctrine to permit enforcement of the 
reasonable portions. The blue pencil doctrine permits excising language but not rewriting the 
agreement." (citation omitted)). 

Survey of Recent Developments in 
Indiana Product Liability Law 

Joseph R. Alberts* 
James Petersen** 
Robert B. Thornburg' 


The 2008 survey period^ produced some thought-provoking opinions for 
practitioners and judges who handle product hability Utigation in Indiana. 
Indeed, the decisions rendered during this survey period raise nearly as many 
questions as they resolve, particularly when it comes to the intended scope of the 
Indiana Product Liability Act (IPLA).^ This Survey does not attempt to address 
in detail all of the cases decided during the survey period.^ Rather, it examines 

* Litigation Counsel, The Dow Chemical Company, Midland, Michigan and Dow 
AgroSciences LLC, Indianapolis. B.A., cum laude, 1991, Hanover College; J.D., magna cum 
laude, 1994, Indiana University School of Law — Indianapolis. 

** Partner, Ice Miller LLP, Indianapolis. B.A., 1970, Illinois State University; M.A., 1973, 
University of Illinois; J.D., magna cum laude, 1976, Indiana University School of 
Law — Bloomington. The authors greatly appreciate the research and drafting assistance provided 
by Christina Laun, Attorney, Ice Miller LLP, Indianapolis, B.A., magna cum laude, 2004, Butler 
University, J.D, cum laude, 2007, Indiana University School of Law-Indianapolis. 

*** Member, Frost Brown Todd LLC, Indianapolis. B.S., cum laude. Ball State University; 
J.D., 1996, Indiana University School of Law — Bloomington. 

1. The survey period is October 1, 2007, to September 30, 2008. 

2. This Article follows the lead of the Indiana General Assembly and employs the term 
"product liability" (not "products liability") when referring to actions governed by the IPLA. 

3. Courts issued several important opinions in cases in which the theory of recovery was 
related to or in some way based upon "product liability" principles, but the appellate issue did not 
involve a question implicating substantive Indiana product liability law. Those decisions are not 
addressed in detail here because of space constraints, even though they may be interesting to 
Indiana product liability practitioners. See generally Ebea v. Black & Decker, Inc., No. l:07-cv- 
1146-DFH-TAB, 2008 U.S. Dist. LEXIS 35833 (S.D. Ind. May 1, 2008) (denying a motion to 
dismiss based on Indiana's Worker's Compensation Act where defendant argued that the statute 
provided the employee with exclusive remedy for work related injuries); Kazmer v. Bayer 
Healthcare Pharm., Inc., No. 2:07-CV-l 12-TS, 2007 U.S. Dist. LEXIS 85789 (N.D. Ind. Nov. 19, 
2007) (involving claims of relation back of amended complaint to correct names of defendants and 
to add new defendants.); McDaniel v. Synthes, Inc., No. 2:07-CV-245RM, 2007 U.S. Dist. LEXIS 
80520 (N.D. Ind. Oct. 20, 2007) (dealing with a removal based on fraudulent joinder of non-diverse 
in-state defendants and granting a remand); Nature's Link, Inc. v. Przybyla, 885 N.E.2d 709 (Ind. 
Ct. App. 2008) (granting a new trial for failure of other party to disclose expert witness pursuant 
to iND. TrialRule 26(E)); AUianz Ins. Co. v. Guidant Corp., 884 N.E.2d 405 (Ind. Ct. App. 2008) 
(involving an insurance coverage dispute associated with the recall of a medical device used to 
repair abdominal aortic aneurysms), trans, denied, (Ind. Jan. 8, 2009); Fitz v. Rust-Oleum Corp., 
883 N.E.2d 1177 (Ind. Ct. App.) (indemnity claim by marketer of spray paint against can 

1094 INDIANA LAW REVIEW [Vol. 42: 1093 

selected cases that discuss important, substantive product liability issues. This 
Survey also provides some background information, context, and commentary 
when appropriate. 

I. The Scope OF THE IPLA 

The Indiana General Assembly first enacted the IPLA in 1978."^ It originally 
governed claims in tort utilizing both negligence and strict liability theories. In 
1983, the General Assembly amended it to apply only to strict liability actions.^ 
In 1995, the General Assembly amended the IPLA to once again encompass 
theories of recovery based upon both strict liability and negligence.^ 

In 1998, the General Assembly repealed the entire IPLA and recodified it, 
effective July 1, 1998.^ The 1998 recodification did not make substantive 
revisions; it merely redesignated the statutory numbering system to make the 
IPLA consistent with the General Assembly's reconfiguration of statutes 
governing civil practice. 

The IPLA, Indiana Code sections 34-20-1-1 to -9-1, governs and controls all 
actions that are brought by users or consumers against manufacturers or sellers 
for physical harm caused by a product, "regardless of the substantive legal theory 
or theories upon which the action is brought."^ When Indiana Code sections 34- 
20-1-1 and -2-1 are read together, there are five unmistakable threshold 
requirements for IPLA liability: (1) a claimant who is a user or consumer and is 
also "in the class of persons that the seller should reasonably foresee as being 
subject to the harm caused";^ (2) a defendant that is a manufacturer or a "seller 
. . . engaged in the business of selling [a] product";^^ (3) "physical harm caused 
by a product";'^ (4) a product that is "in a defective condition unreasonably 

manufacturer as a result of an injury caused by a can of spray paint), trans, denied, 898 N.E.2d 
1228 (Ind. 2008). 

4. Act of Mar. 10, 1978, No. 141, § 28, 1978 Ind. Acts 1308, 1308-10. 

5. Act of Apr. 21, 1983, No. 297, 1983 Ind. Acts 1814. 

6. Act of Apr. 26, 1995, No. 278, §§ 1-7, 1995 Ind. Acts 4051, 4051-56; see Progressive 
Ins. Co. V. Gen. Motors Corp., 749 N.E.2d 484, 487 n.2 (Ind. 2001). 

7. Act of Mar. 6, 1998, 1998 Ind. Acts 1. The current version of the IPLA is found in 
Indiana Code sections 34-20-1-1 to -9-1. 

8. Ind. Code § 34-20-1-1 (2008). 

9. Indiana Code section 34-20-1-1 identifies a proper IPLA claimant as a "user" or 
"consumer." Indiana Code section 34-20-2-1(1) requires that IPLA claimants be in the "class of 
persons that the seller should reasonably foresee as being subject to the harm caused by the 
defective condition." 

10. Indiana Code section 34-20- 1 - 1 (2) identifies proper IPLA defendants as "manufacturers" 
or "sellers." Indiana Code section 34-20-2-1(2) provides the additional requirement that such a 
manufacturer or seller also be "engaged in the business of selling the product," effectively 
excluding comer lemonade stand operators and garage sale sponsors from IPLA liability. 

11. Ind. Code § 34-20-1-1(3) (2008). 


dangerous to [a] user or consumer" or to his property; ^^ and (5) a product that 
"reach [ed] the user or consumer without substantial alteration in [its] 
condition."^^ Indiana Code section 34-20-1-1 makes clear that the IPLA governs 
and controls all claims that satisfy these five requirements, "regardless of the 
substantive legal theory or theories upon which the action is brought."*'^ 

A. "User" or ''Consumer" 

The language the General Assembly employs in the IPLA is very important 
when determining who qualifies as IPLA claimants. Indiana Code section 34-20- 
1-1 provides that the IPLA governs claims asserted by "users" and 
"consumers."'^ For purposes of the IPLA, "consumer" means: 

(1) a purchaser; 

(2) any individual who uses or consumes the product; 

(3) any other person who, while acting for or on behalf of the injured 
party, was in possession and control of the product in question; or 

(4) any bystander injured by the product who would reasonably be 
expected to be in the vicinity of the product during its reasonably 
expected use.^^ 

"User" has the same meaning as "consumer."^^ Several published decisions in 

12. Id. §34-20-2-1. 

13. Id. ^ 34-20-2-1(3). Indiana Pattern Jury Instruction 7.03 sets out a plaintiffs burden of 
proof in a product liability action. It requires a plaintiff to "prove each of the following 
propositions by a preponderance of the evidence": 

1 . The defendant was a manufacturer of the product [or the part of the product] 
alleged to be defective and was in the business of selling the product; 

2. The defendant sold, leased, or otherwise put the product into the stream of 

3. The plaintiff was a user or consumer of the product; 

4. The product was in a defective condition unreasonably dangerous to users or 
consumers (or to user's or consumer's property); 

5. The plaintiff was in a class of persons the defendant should reasonably have 
foreseen as being subject to the harm caused by the defective condition; 

6. The product was expected to and did reach the plaintiff without substantial 
alteration of the condition in which the defendant sold the product; 

7. The plaintiff or the plaintiffs property was physically harmed; and 

8. The product was a proximate cause of the physical harm to the plaintiff or the 
plaintiffs property. 

IND. Pattern Jury Instructions — Civil § 7.03 (2005). 

14. iND. Code § 34-20-1-1 (2008). 

15. Id. 

16. M§ 34-6-2-29. 

17. Id. § 34-6-2-147. 

1096 INDIANA LAW REVIEW [Vol. 42: 1093 

recent years construe the statutory definitions of "user" and "consumer." ^^ 

A literal reading of the BPLA demonstrates that even if a claimant qualifies 
as a statutorily-defined "user" or "consumer," he or she also must satisfy another 
statutorily-defined threshold before proceeding with a claim under the IPLA. 
That additional threshold is found in Indiana Code section 34-20-2-1(1), which 
requires that the "user" or "consumer" also be "in the class of persons that the 
seller should reasonably foresee as being subject to the harm caused by the 
defective condition." ^^ Thus, the plain language of the statute assumes that a 
person or entity must already qualify as a "user" or a "consumer" before a 
separate "reasonable foreseeability" analysis is undertaken. In that regard, the 
IPLA does not appear to provide a remedy to a claimant whom a seller might 
reasonably foresee as being subject to the harm caused by a product's defective 
condition if that claimant falls outside of the IPLA' s definition of "user" or 

There were no significant published decisions during the survey period that 
interpreted the terms "user" or "consumer."^^ 

18. See Butler v. City of Peru, 733 N.E.2d 912, 919 (Ind. 2000) (mentioning that a 
maintenance worker could be considered a "user or consumer" of an electrical transmission system 
because his employer was the ultimate user and he was an employee of the "consuming entity"); 
Estate of Shebel v. Yaskawa Elec. Am., Inc., 713 N.E.2d 275, 279 (Ind. 1999) (holding that a "user 
or consumer" includes a distributor who uses the product extensively for demonstration purposes). 
For a more detailed analysis of Butler, see Joseph R. Alberts & David M. Henn, Survey of Recent 
Developments in Indiana Product Liability Law, 34 iND. L. REV. 857, 870-72 (2001). For a more 
detailed analysis of Estate of Shebel, see Joseph R. Alberts, Survey of Recent Developments in 
Indiana Product Liability Law, 33 iND. L. REV. 1331, 1333-36 (2000). 

19. Indiana Code section 34-20-2-1 imposes liability when 

a person who sells, leases, or otherwise puts into the stream of commerce any product 
in a defective condition unreasonably dangerous to any user or consumer or to the user' s 
or consumer's property . . . if . . . that user or consumer is in the class of persons that the 
seller should reasonably foresee as being subject to the harm caused by the defective 

20. During the 2006 survey period, the Indiana Supreme Court decided Vaughn v. Daniels 
Co. (West Virginia), Inc., 841 N.E.2d 1 133 (Ind. 2006). That case helped to further define who 
qualifies as a "user" or "consumer" for purposes of bringing an action under the IPLA. In that case, 
Daniels Company (Daniels) designed and built a coal preparation plant at a facility owned by Solar 
Sources, Inc. (Solar). Id. at 1 136. Part of the design involved the installation of a heavy media coal 
sump. Id. An out-of-state steel company manufactured the sump that Daniels designed and sent 
it, unassembled, to the facility. Id. Stephen Vaughn worked for the construction company that 
Daniels hired to install the sump. Id. During the installation process, Vaughn climbed onto the top 
of the sump to help connect a pipe. Id. The chain he was using to secure the pipe in place gave 
way, causing Vaughn to fall and sustain injuries. Id. Vaughn did not wear his safety belt when he 
climbed onto the sump. Id. The Indiana Supreme Court held that Daniels could not be liable under 
the IPLA because Vaughn was not a "user" or "consumer." Id. at 1 141-43. Because the "product" 
was not assembled and installed at the time of Vaughn's accident, "neither Vaughn nor anyone else 
was a user of the product at the time it was still in the process of assembly and installation." Id. at 


B. ''Manufacturer'' or ''Seller" 

For purposes of the IPLA, '"[m]anufacturer' . . . means a person or an entity 
who designs, assembles, fabricates, produces, constructs, or otherwise prepares 
a product or a component part of a product before the sale of the product to a user 
or consumer."^* "'Seller' . . . means a person engaged in the business of selling 
or leasing a product for resale, use, or consumption."^^ Indiana Code section 34- 
20-2-1(2) employs nearly identical language when addressing the threshold 
requirement that liability under the IPLA will not attach unless ''the seller is 
engaged in the business of selling the product."^^ 

Sellers can be held liable as manufacturers in two ways. First, a seller can 
be held liable as a manufacturer if the seller fits within the definition of 
"manufacturer" found in Indiana Code section 34-6-2-77(a), which expressly 
includes a seller who: 

(1) has actual knowledge of a defect in a product; 

(2) creates and furnishes a manufacturer with specifications relevant to 
the alleged defect for producing the product or who otherwise exercises 
some significant control over all or a portion of the manufacturing 

(3) alters or modifies the product in any significant manner after the 
product comes into the seller's possession and before it is sold to the 
ultimate user or consumer; 

(4) is owned in whole or significant part by the manufacturer; or 

(5) owns in whole or significant part the manufacturer.^'* 

Second, a seller can be deemed a statutory "manufacturer" and, therefore, be 
held liable to the same extent as a manufacturer in one other limited 
circumstance. Indiana Code section 34-20-2-4 provides that a seller may be 
deemed a "manufacturer" "if the court is unable to hold jurisdiction over a 


21. IND. Code § 34-6-2-77 (2008). 

22. Id. § 34-6-2-136. 

23. Id. § 34-20-2-1(2); see, e.g., Williams v. REP Corp., 302 F.3d 660, 662-64 (7th Cir. 
2002) (recognizing that Indiana Code section 33-1-1.5-2(3), the predecessor to Indiana Code 
section 34-20-2-1, imposes a threshold requirement that an entity must have sold, leased, or 
otherwise placed a defective and unreasonably dangerous product into the stream of commerce 
before IPLA liability can attach and before that entity can be considered a "manufacturer" or 
"seller"); Del Signore v. Asphah Drum Mixers, 182 F. Supp. 2d 730, 745-46 (N.D. Ind. 2002) 
(holding that although the defendant provided some technical guidance or advice relative to ponds 
at an asphalt plant, such activity was not sufficient to constitute substantial participation in the 
integration of the plant with the pond so as to deem it a "manufacturer" of the plant); see also 
Joseph R. Alberts & James M. Boyers, Survey of Recent Developments in Indiana Product Liability 
Law, 36 iND. L. REV. 1 165, 1 170-72 (2003). 

24. iND. Code § 34-6-2-77(a) (2008). 

1098 INDIANA LAW REVIEW [Vol. 42: 1093 

particular manufacturer" and if the seller is the "manufacturer's principal 
distributor or seller. "^^ 

Practitioners also must be aware that when the theory of liability is based 
upon "strict liability in tort,"^^ Indiana Code section 34-20-2-3 provides that an 
entity that is merely a "seller" and cannot otherwise be deemed a "manufacturer" 
is not liable and is not a proper IPLA defendant. ^^ 

A few recent Indiana decisions have addressed the statutory definitions of 
"seller" and "manufacturer."^^ The 2008 survey period produced a couple of 

25. Id. § 34-20-2-4. Kennedy v. Guess, Inc., 806 N.E.2d 776 (Ind. 2004), is the most recent 
case interpreting Indiana Code section 34-20-2-4 and specifically addressing the circumstances 
under which entities may be considered "manufacturers" or "sellers" under the IPLA. See also 
Goines v. Fed. Express Corp., No. 99-CV-4307-JPG, 2002 U.S. Dist. LEXIS 5070, at *14-15 (S.D. 
111. Jan. 8, 2002). The court, applying Indiana law, examined the "unable to hold jurisdiction over" 
requirement oflndiana Code section 34-20-2-4. Id. at*9. The plaintiffassumed that "jurisdiction" 
refers to the power of the court to hear a particular case. Id. at *9-10. The defendant argued that 
the phrase equates to "personal jurisdiction." Id. at *12. The court refused to resolve the issue, 
deciding instead to simply deny the motion for summary judgment because the designated evidence 
did not clearly establish entitlement to application oflndiana Code section 34-20-2-4. Id. at *14- 

26. The phrase "strict liability in tort," to the extent that the phrase is intended to mean 
"liability without regard to reasonable care," appears to encompass only claims that attempt to 
prove that a product is defective and unreasonably dangerous by utilizing a manufacturing defect 
theory. Indiana Code section 34-20-2-2 provides that cases utilizing a design defect or a failure to 
warn theory are judged by a negligence standard, not a "strict liability" standard. 

27. iND. Code § 34-20-2-3 (2008). In Ritchie v. Glidden Co. , 242 F.3d 7 1 3, 725-26 (7th Cir. 
2001), the court cited what is now Indiana Code section 34-20-2-3 for the proposition that sellers 
in a product liability action may not be liable unless the seller can be deemed a manufacturer. 
Applying that reading of what is now Indiana Code section 34-20-2-3, the court held that defendant 
Glidden could not be liable pursuant to the IPLA because the plaintiff failed to designate sufficient 
facts to demonstrate that Glidden had actual knowledge of an alleged product defect (lack of 
warning labels) and because Glidden did not meet any of the other statutory definitions or 
circumstances under which it could be deemed a manufacturer. Id. There is an omission in the 
Ritchie court' s citation to what is now Indiana Code section 34-20-2-3 that may be quite significant. 
The statutory provision quoted in Ritchie leaves out the following important highlighted language: 
"[A] product liability action [based on the doctrine of strict liability in tort] may not be commenced 
or maintained." Id. at 725 (emphasis added). The Ritchie case involved a failure to warn claim 
against Glidden under the IPLA. Id. Indiana Code section 34-20-2-2 makes it clear that "liability 
without regard to the exercise of reasonable care" (strict liability) applies now only to product 
liability claims alleging a manufacturing defect theory. Claims alleging design or warning defect 
theories are controlled by a negligence standard. See, e.g., Burt v. Makita USA, Inc., 212 F. Supp. 
2d 893, 899 (N.D. Ind. 2002); see also Alberts & Boyers, supra note 23, at 1 173-75. 

28. There have been some important recent decisions in this area. See Fellner v. Philadelphia 
Toboggan Coasters, Inc., No. 3:05-cv-21 8-SEB-WGH, 2006 WL 2224068 (S.D. Ind. Aug. 2, 2006) 
(involving a girl who was killed when she was ejected from a wooden roller coaster operated as an 
attraction at Holiday World amusement park); Thomburg v. Stryker Corp., No. 1 :05-cv- 1 378-RLY- 


federal decisions that are relevant in this area. In the first case, Mesman v. Crane 
Pro Services^^ John Mesman suffered serious leg injuries when a load of steel 
sheets fell on him while he was unloading them from a railcar.^^ The plant used 
a crane to do the unloading.^ ^ Before the accident, Mesman' s employer hired 
defendant Konecranes, Inc. to rebuild the crane. ^^ Konecranes evaluated the 
design and operation of the crane and made several design changes, including 
supplementing the controls in the operator' s cab with a hand-held remote-control 
device that the operator could use to control the crane from the ground.^^ On the 
day of the accident, one of Mesman' s co-workers was operating the crane using 
the remote while Mesman worked in one of the railcars.^"^ The co-worker failed 
to press an emergency stop button on the remote to avert a collision between two 
parts of the crane.^^ That collision caused the load to fall, resulting in Mesman' s 
injuries. ^^ 

The trial judge permitted Konecranes to argue that it could not be responsible 
under the IPLA for liability arising out of the design of the crane because the 
company had merely "repaired" the crane and, therefore, did not manufacture it.^^ 
Reviewing that issue on appeal, the Seventh Circuit determined that the trial 
judge should not have permitted Konecranes to argue that it could not be liable 
under the IPLA because it did not manufacture the crane.^^ Although it is true 
that the IPLA does not countenance design defect liability for those persons or 
entities who merely repair a product, it does recognize design defect liability for 
those persons or entities who "rebuild" or otherwise engage in efforts to "re- 
design" a product.^^ The Seventh Circuit believed that the evidence 
demonstrated unequivocally that "Konecranes rebuilt the crane, [specifically] 
altering its design to enable it to be operated from ground level rather than just 
from the overhead cab.'"^^ As such, Konecranes should not have been allowed 
to argue that it could avoid IPLA liability under the circumstances."^^ 

TAB, 2006 WL 1 84335 1 (S.D. Ind. June 29, 2006) (involving a plaintiff who filed product liability 
and medical malpractice claims after hip replacement surgery). 

29. 512 F.3d 352 (7th Cir. 2008). 

30. Id. at 353. 

31. Id. 

32. Id. 

33. Id. The precise changes that Konecranes made are discussed in detail infra Part I.D.2. 

34. Mat 354. 

35. Id. 

36. Id. 

37. Id. at 356. 

38. Id. 

39. Id. (citing Richardson v. Gallo Equip. Co., 990 F.2d 330 (7th Cir. 1993); Lenhardt Tool 
& Die Co. V. Lumpe, 703 N.E.2d 1079, 1085 (Ind. Ct. App. 1998)). 

40. Id. 

41 . Id. Interestingly, the court found that the trial court's error in permitting Konecranes to 
argue it was not liable because it merely "repaired" the crane was "inconsequential" because the 
plaintiffs were also allowed to pursue a "common law negligence" claim. Id. We discuss that 

1 100 INDIANA LAW REVIEW [Vol. 42: 1093 

Another federal case, LaBonte v. Daimler-Chrysler (LaBonte 11),^^ provides 
some additional guidance for practitioners in this area."^^ Kelly LaBonte was 
killed in an automobile accident on May 29, 2005, while driving a 1996 Jeep 
Grand Cherokee. "^"^ Plaintiff claimed that during the accident the seatbelt 
retractor unlocked, permitting the seatbelt to spool out."^^ A label on the seatbelt 
webbing read that the restraint was manufactured by AlliedSignal on April 4, 

Plaintiff sued Daimler-Chrysler and Key Safety Systems alleging, among 
other things, that Key was the manufacturer of the seatbelt."^^ Key, however, did 
not even begin manufacturing seat belts until more than a year after the seat belt 
at issue was manufactured."^^ It was at that time that Key's predecessor. Breed 
Technologies, Inc.,"^^ purchased certain assets from AlliedSignal.^^ As part of the 
purchase of AlliedSignars assets. Key agreed to assume some of AlliedSignal' s 
potential liabilities.^' Roughly two years after it purchased the assets from 
AlliedSignal, Key filed for bankruptcy reorganization under Chapter XL In the 
proceeding. Key discharged any claim that arose from any agreement entered 
before its bankruptcy confirmation order.^^ In its reorganization plan. Key did 
not affirm any of the potential liabilities assumed or contemplated in the 
AlliedSignal asset purchase agreement.^^ Key moved for summary judgment 

portion of the court's analysis infra Part I.E. 

42. No. 3:07-CV-232-TS, 2008 WL 513319 (N.D. Ind. Feb. 22, 2008). 

43. To fully understand LaBonte, there are two decisions that must be reviewed and 
considered. The first, LaBonte v. Daimler-Chrysler {LaBonte /), No. 3:07-CV-232-TS, 2008 U.S. 
Dist. LEXIS 1 1384 (N.D. Ind. Feb. 14, 2008) {LaBonte /), was decided on February 14, 2008. The 
second, LaBonte v. Daimler-Chrysler {LaBonte II), No. 3:07-CV-232-TS, 2008 WL 5 1 33 19 (N.D. 
Ind. Feb. 22, 2008), was decided on February 22, 2008. In LaBonte I, the court denied Key Safety 
Systems summary judgment motion without prejudice because, even though unopposed, the court 
was not satisfied that Key could not be liable as a successor manufacturer to AlliedSignal. LaBonte 
/, 2008 U.S. Dist. LEXIS 1 1384, at *7-13. On rehearing in LaBonte II, however, the court granted 
Key's motion. LaBonte II, 2008 WL 513319, at *l-2. 

44. LaBonte II,200SWL5\33l9,Sitn. 

45. LaBonte I, 2008 U.S. Dist. LEXIS 1 1384, at *5. 

46. Id. 

47. Id. at *2. 

48. /J. at*5-6. 

49. In 2003, Breed Technologies, Inc., changed its name to Key Safety Systems, Inc. Id. at 
*6. Even though some of the events pertinent to the court's decision occurred prior to Breed 
Technologies changing its name to Key Safety Systems, for the sake of consistency and easier 
comprehension, the authors have used Key throughout the discussion. The name change was not 
significant to the court's analysis or decision. 

50. Id. Sit *5. 

51. Id. 

52. M at*5-6. 

53. Id. 


asserting that it was not the manufacturer of the seat belt.^"^ The court quoted the 
definition of manufacturer from the IPLA^^ and easily determined that Key was 
not the manufacturer of the seat belt because it was manufactured over eighteen 
months before Key entered the occupant restraint manufacturing business.^^ 
Nonetheless, the court analyzed whether Key could be liable as a successor to the 
original manufacturer, AlliedSignal. 

Initially, the court noted that when one corporation purchases the assets of 
another, the purchaser does not assume the debts and liabilities of the seller 
unless one of four exceptions recognized under Indiana law creating successor 
liability exists.^^ The four exceptions to Indiana's general rule of non-liability 
are: (1) an implied or express agreement to assume the obligation; (2) a 
fraudulent sale to escape liability; (3) a de facto consolidation or merger; and, (4) 
where the purchase was a mere continuation of the seller. ^^ The court noted that 
the first exception applied because Key agreed to accept liability in its purchase 
agreement with AlliedSignal; however, because of Key's bankruptcy, the 
bankruptcy court had discharged any liability Key agreed to bear in the purchase 
agreement years earlier.^^ The discharge, however, had no impact on the three 
remaining exceptions.^^ Key's summary judgment filings did not discuss, and no 
evidence was designated to address, the remaining three exceptions.^^ Thus the 
court could not conclude on the record it had before it that none of the other 
exceptions applied.^^ Therefore, the court denied Key's motion, but allowed it 
to refile a second motion addressing the other exceptions to the general rule of 
successor non-liability.^^ 

54. Mat*l. 

55. Indiana Code section 34-6-2-77 defines a manufacturer as "a person or entity who 
designs, assembles, fabricates, produces, constructs, or otherwise prepares a product or a 
component part of a product before the sale of the product to a user or consumer," 

56. LaBonte I, 2008 U.S. Dist. LEXIS 1 1384, at *7. 

57. Id. at *7-8 (citing Guerrero v. Allison Engine Co., 725 N.E.2d 479, 482 (Ind. Ct. App. 

58. Id. at *8 (citing Guerrero, 725 N.E.2d at 482). 

59. Id. 

60. The three exceptions not addressed were: (1) a fraudulent sale to escape liability; (2) a 
de facto consolidation or merger; and, (3) where the purchase was a mere continuation of the seller. 

61. /J. at*8-9. 

62. Id. at *9. Key also argued that the bankruptcy discharge prevented it from being sued as 
AlliedSignal's successor. Id. The court did not agree. Id. at *9-10. It concluded that Key's 
argument was inconsistent with Fogel v. Zell, 221 F.3d 955, 960 (7th Cir. 2000), because ordinary 
tort victims have no claim, for bankruptcy purposes, until an injury occurs. Id. at *1 0-1 2. And, the 
court reasoned, the case before it was not a mass tort situation where, even though the claim may 
not have been ripe when the bankruptcy was filed, the bankruptcy proceeding nevertheless 
discharged the claim. /<i. at *1 1-12. Instead, the plaintiff did not have a claim when Key filed for 
bankruptcy so the estate's claim was not discharged. Id. at *12. 

63. Id. at*12-13. 

1 102 INDIANA LAW REVIEW [Vol. 42: 1093 

Five days later, Key filed a motion to reconsider. ^"^ This time Key designated 
evidence that AlliedSignal, the corporation from whom Key purchased assets to 
enter the occupant restraint business and who made the seat belt years prior to 
Ms. LaBonte' s death, was a solvent Delaware corporation.^^ The court noted that 
the exceptions to the general rule of non-liability of a successor corporation 
require that the predecessor corporation cease to exist.^^ The court first noted 
that it had earlier determined that Key was not the manufacturer and that any 
obligation to assume liability through the asset purchase agreement was 
discharged in the bankruptcy proceeding.^^ It then reasoned that because 
AlliedSignal continued to exist, Key could not be liable as its successor 
corporation.^^ Because Key was neither the manufacturer of the seat belt nor 
liable as a successor corporation to the manufacturer, it was entitled to judgment 
as a matter of law and the court entered final judgment in its favor. ^^ 

C Physical Harm Caused by a Product 

For purposes of the IPLA, "*[p]hysical harm' . . . means bodily injury, death, 
loss of services, and rights arising from any such injuries, as well as sudden, 
major damage to property. "^° It "does not include gradually evolving damage to 
property or economic losses from such damage."^^ 

For purposes of the IPLA, "*[p]roduct . . . means any item or good that is 
personalty at the time it is conveyed by the seller to another party."^^ 'The term 
does not apply to a transaction that, by its nature, involves wholly or 

64. LaBonte v. Daimler-Chrysler {LaBonte IT), No. 3:07-CV-232-TS, 2008 WL 513319, at 
*1 (N.D. Ind. Feb. 22, 2008). 

65. Mat*l-2. 

66. Id. at *1 (quoting Guerrero v. Allison Engine Co., 725 N.E.2d 479, 482 (Ind. Ct. App. 

67. Id. 

68. Id. Sit n. 

69. Id. 

70. Ind. Code § 34-6-2-105(a) (2008). 

71. M § 34-6-2-105(b); see, e.g., Miceli v. Ansell, Inc., 23 F. Supp. 2d 929, 933 (N.D. Ind. 
1998) (denying a motion to dismiss a case determining that Indiana recognizes that pregnancy may 
be considered a "harm" in certain circumstances); Fleetwood Enters., Inc. v. Progressive N. Ins. 
Co., 749 N.E.2d 492, 493 (Ind. 2001) (holding that "personal injury and damage to other property 
from a defective product are actionable under the [IPLA], but their presence does not create a claim 
under the Act for damage to the product itself); Progressive Ins. Co. v. Gen. Motors Corp., 749 
N.E.2d 484, 486 (Ind. 2001) (holding that there is no recovery under the IPLA where a claim is 
based on damage to the defective product itself); see also Great N. Ins. Co. v. Buddy Gregg Motor 
Homes, Inc., No. IP 00-1378-C-H/K, 2002 U.S. Dist. LEXIS 7830, at *2 (S.D. Ind. Apr. 29, 2002) 
(holding that there was no recovery under the IPLA in a case involving a motor home destroyed in 
a fire allegedly caused by a defective wire in the engine compartment). 

72. Ind. Code §34-6-2-1 14(a) (2008). 


predominantly the sale of a service rather than a product 


D, Defective and Unreasonably Dangerous 

Only products that are in a "defective condition" are subject to IPLA 
liability/"^ For purposes of the IPLA, a product is in a "defective condition" 

if, at the time it is conveyed by the seller to another party, it is in a 

(1) not contemplated by reasonable persons among those considered 
expected users or consumers of the product; and 

(2) that will be unreasonably dangerous to the expected user or consumer 
when used in reasonably expectable ways of handling or consumption.^^ 

Recent cases confirm that establishing one of the foregoing threshold 
requirements without the other will not result in liability under the IPLA7^ 

Claimants in Indiana may prove that a product is in a "defective condition" 
by asserting one or a combination of three theories: (1) the product has a defect 
in its design (a "design defect"); (2) the product lacks adequate or appropriate 
warnings (a "warning defect"); or (3) the product has a defect that is the result 
of a malfunction or impurity in the manufacturing process (a "manufacturing 

73. Id. § 34-6-2-1 14(b). Although it is a "not for publication" memorandum decision, 
Fincherv. Solar Sources, Inc.,No. 42A01-0701-CV-25, 2007 WL 1953473 (Ind. Ct. App.) (mem.), 
trans, denied, 878 N.E.2d 218 (Ind. 2007), is an opinion that was rendered during the 2007 survey 
period to which practitioners may look for additional guidance about what is and what is not a 
"product" for purposes of the IPLA. In Fincher, the plaintiff was a truck driver who was injured 
in an accident while hauling coal sludge. Id. at *1. Coal sludge has a wet consistency and is 
comprised of the fine particulate matter that remains after raw coal is mined and put through a 
washing process. Id. A panel of the Indiana Court of Appeals unanimously agreed that coal sludge 
was not a product under the IPLA. Id. at *6. According to the Fincher court. 

The coal sludge in question is a waste by-product of a coal mining operation. It 
is trash. The coal sludge was not marketable or ever in a marketed state. It was not sold 
or being transported to a consumer. It was being transported to a disposal site. It was 
also never intended for consumption or for any use by any consumer. 

74. Ind. Code § 34-20-2-1(1) (2008); see also Westchester Fire Ins. Co. v. Am. Wood 
Fibers, Inc., No. 2:03-CV-178-TS, 2006 WL 3147710, at *5 (N.D. Ind. Oct. 31, 2006). 

75. Ind. Code § 34-20-4-1 (2008). 

76. See Baker v. Heye-Am., 799 N.E.2d 1135, 1140 (Ind. Ct. App. 2003) ("[U]nder the 
IPLA, the plaintiff must prove that the product was in a defective condition that rendered it 
unreasonably dangerous." (citing Cole v.Lantis Corp., 7 14 N.E.2d 194, 198 (Ind. Ct. App. 1999))). 

77. See First Nat'l Bank & Trust Corp. v. Am. Eurocopter Corp. {Mow II), 378 F.3d 682, 
689 (7th Cir. 2004); Westchester Fire Ins. Co., 2006 WL 3147710, at *5; Baker, 799 N.E.2d at 
1140; Natural Gas Odorizing, Inc. v. Downs, 685 N.E.2d 155, 161 (Ind. Ct. App. 1997). 
Additional authority is found in Troutnerv. Great Dane Ltd. Partnership, No. 2:05-CV-040-PRC, 

1 104 INDIANA LAW REVIEW [Vol. 42: 1093 

Although claimants are free to assert any of those three theories for proving 
that a product is in a "defective condition," the IPLA provides explicit statutory 
guidelines identifying when products are not defective as a matter of law. 
Indiana Code section 34-20-4-3 provides that "[a] product is not defective under 
[the BPLA] if it is safe for reasonably expectable handling and consumption. If 
an injury results from handling, preparation for use, or consumption that is not 
reasonably expectable, the seller is not liable under [the IPLA]."^^ In addition, 
Indiana Code section 34-20-4-4 provides that "[a] product is not defective under 
[the IPLA] if the product is incapable of being made safe for its reasonably 
expectable use, when manufactured, sold, handled, and packaged properly."^^ 

In addition to the two specific statutory pronouncements identifying when a 
product is not "defective" as a matter of law, Indiana law also defines when a 
product may be considered "unreasonably dangerous" for purposes of the IPLA. 
A product is "unreasonably dangerous" only if its use "exposes the user or 
consumer to a risk of physical harm . . . beyond that contemplated by the ordinary 
consumer who purchases [it] with the ordinary knowledge about the product's 
characteristics common to the community of consumers. "^^ A product is not 

2006 WL 2873430 (N.D. Ind. Oct. 5, 2006), which confirms that a plaintiff s product liability claim 
will fail as a matter of law if he or she does not articulate a legitimate manufacturing, design, or 
warning defect. In that case, the plaintiff was a semi-truck driver who fell and suffered head injury 
when a grab bar mounted on his trailer gave way. Id. at *1. The plaintiff sued the companies that 
manufactured and sold the trailer and the grab bar, alleging that they placed a trailer with a grab bar 
into the stream of commerce in a defective and unreasonably dangerous condition. Id. The case 
was removed to federal court, and both manufacturing defendants moved for summary judgment, 
pointing out that "plaintiffs own expert . . . testified that the most likely cause of the failure of the 
grab bar was inadequate and negligent maintenance." Id. at *3. The plaintiff did not file a response 
to either motion. Id. at *1. Because, under such circumstances, no reasonable jury could find for 
plaintiff on the product liability claims, the court granted summary judgment. Id. at *3. 

78. Ind. Code § 34-20-4-3 (2008). One recent case discussing "reasonably expectable use" 
is Hunt V. Unknown Chemical Manufacturer No. One, No. IP 02-389-C-M/S, 2003 U.S. Dist. 
LEXIS 20138, at *28-32 (S.D. Ind. Nov. 5, 2003). In Hunt, a homeowner tore down and burned 
a deck that was made from lumber treated with chromium copper arsenate. Id. at *3-4. He spread 
the ashes as fertilizer in the family garden. Id. at *4. Later tests of the soil in the garden revealed 
elevated levels of arsenic. Id. Judge Larry McKinney held that the homeowner could not pursue 
product liability claim because his use of the lumber was not, legally speaking, foreseeable, 
intended, or expected.. Id. at *27-37. 

79. Ind. Code §34-20-4-4 (2008). 

80. Id. § 34-6-2-146; see also Baker, 799 N.E.2d at 1 140; Cole v. Lantis Corp., 714 N.E.2d 
194, 199 (Ind. Ct. App. 1999). In Baker, a panel of the Indiana Court of Appeals wrote that "[t]he 
question whether a product is unreasonably dangerous is usually a question of fact that must be 
resolved by the jury." 799 N.E.2d at 1 140 (emphasis added) (citing Vaughn v. Daniels Co. (W. 
Va.), Inc., 777 N.E.2d 1 1 10, 1 128 (Ind. Ct. App. 2002), vacated, 841 N.E.2d 1 133 (2006)). Those 
panels also seem to favor jury resolution in determining reasonably expected use. Indeed, the Baker 
opinion states that 

reasonably expectable use, like reasonable care, involves questions concerning the 


unreasonably dangerous as a matter of law if it injures in a way or in a fashion 
that, by objective measure, is known to the community of persons consuming the 
product.^ ^ 

In cases alleging improper design or inadequate warnings as the theory for 
proving that a product is in a "defective condition," recent decisions have quite 
clearly recognized that the substantive defect analysis (i.e., whether a design was 
inappropriate or whether a warning was inadequate) should /(9//6>w a threshold 
analysis that first examines whether, in fact, the product at issue is "unreasonably 

ordinary prudent person, or in the case of products liability, the ordinary prudent 
consumer. The manner of use required to establish "reasonably expectable use" under 
the circumstances of each case is a matter peculiarly within the province of the jury. 
Id. (citing Vaughn, 111 N.E.2d at 1 128). 

It would seem incorrect, however, to conclude from those pronouncements that there exists 
something akin to a presumption that juries always should resolve whether a product is 
unreasonably dangerous or whether a use is reasonably expectable. Indeed, recent cases have 
resolved the defective and unreasonably dangerous issue as a matter of law in a design defect 
context even in the presence of divergent expert testimony. 

In Burt V. Makita USA, Inc., 212 F. Supp. 2d 893 (N.D. Ind. 2002), the plaintiff was injured 
when a blade guard on a circular table saw struck him in the eye after one of his co-workers left the 
guard "in what appeared to be in the installed position." Id. at 895. With respect to the defective 
design claims, plaintiffs expert opined that the saw was defective and unreasonably dangerous by 
its design, suggesting that the saw could be designed so that the guaid could be attached without 
tools or that the tools could be physically attached to the saw. Id. at 900. The court rejected the 
claim, holding that the plaintiff and his expert had "wholly failed to show a feasible alternative 
design that would have reduced the risk of injury." Id. ; see also Miller v. Honeywell Int'l, Inc., No. 
IP 98-1742 C-M/S, 2002 U.S. Dist. LEXIS 20478, at *l-4 (S.D. Ind. Oct. 15, 2002) (holding that 
Honeywell's design specifications for planetary gears and gear carrier assembly within the engine 
of an Army UH- 1 helicopter were not defective as a matter of law at the time the specifications were 
introduced into the stream of commerce). 

81. See Baker, 799 N.E.2d at 1 140; see also Moss v. Crosman Corp., 136 F.3d 1 169, 1 174 
(7th Cir. 1998) (writing that a product may be "dangerous" in the colloquial sense, but not 
"unreasonably dangerous" for purposes of IPLA liability). An open and obvious danger negates 
liability. "To be unreasonably dangerous, a defective condition must be hidden or concealed [and] 
evidence of the open and obvious nature of the danger . . . negates a necessary element of the 
plaintiffs prima facie case that the defect was hidden." Hughes v. Battenfeld Glouchester Eng'g 
Co., No. TH 01-0237-C T/H, 2003 U.S. Dist. LEXIS 17177, at *7-8 (S.D. Ind. Aug. 20, 2003) 
(quoting Cole, 714 N.E.2d at 199). In Hughes, the plaintiff injured his hand while separating and 
rethreading plastic film through a machine called a secondary treater nip station. Id. at *2-3. 
Plaintiff admitted that he knew about the dangers associated with using the nip station because he 
was aware of reports by co-workers who were injured performing similar tasks. Id. at *4. Plaintiff 
testified that he was aware of the alleged defect that caused his accident, and on two previous 
occasions he had filed written suggestions with his employer requesting that it reduce the risk of 
injury involved. Id. at *4. Judge Tinder held that the dangerous condition of the nip station was 
open and obvious as a matter of law and entered summary judgment. Id. at *17. 

1 106 INDIANA LAW REVIEW [Vol. 42: 1093 

dangerous. "^^ 

The IPLA provides that liability attaches for placing a product in a "defective 
condition"^^in the stream of commerce even though: "( 1 ) the seller has exercised 
all reasonable care in the manufacture and preparation of the product; and (2) the 
user or consumer has not bought the product from or entered into any contractual 
relation with the seller."^"^ What the IPLA bestows, however, in terms of liability 
despite the exercise of "all reasonable care [i.e., fault]," it then removes for 
design and warning defect cases, replacing it with a negligence standard: 

[I]n an action based on an alleged design defect in the product or based 
on an alleged failure to provide adequate warnings or instructions 
regarding the use of the product, the party making the claim must 
establish that the manufacturer or seller failed to exercise reasonable 
care under the circumstances in designing the product or in providing the 
wammgs or mstructions. 

The statutory language therefore imposes a negligence standard in all product 
liability claims relying upon a design or warning theory to prove defectiveness, 
while retaining strict liability (liability despite the "exercise of all reasonable 
care") only for those claims relying upon a manufacturing defect theory.^^ Thus, 

82. Indeed, in Bourne v. Marty Gilman, Inc., No. l:03-cv-01375-DFH-VSS, 2005 U.S. Dist. 
LEXIS 15467, at *1 (S.D. Ind. July 20, 2005), qff'd, 452 F.3d 632 (7th Cir. 2006) (involving an 
alleged design defect) and Conley v. Lift-All Co., No. l:03-cv-01200-DFH-TAB, 2005 U.S. Dist. 
LEXIS 15468, at *1 (S.D. Ind. July 25, 2005) (involving an alleged warnings defect). Judge 
Hamilton followed that precise approach. 

83. Ind. Code § 34-20-2-1(1) (2008). 

84. M § 34-20-2-2. 

85. Id. 

86. See Mesman v. Crane Pro Servs., 409 F.3d 846, 849 (7th Cir. 2005) ("Under Indiana's 
products liability law, a design defect can be made the basis of a tort suit only if the defect was a 
result of negligence in the design."); First Nat'l Bank & Trust Corp. v. Am. Eurocopter Corp. 
{Mow II), 378 F.3d 682, 690 n.4 (7th Cir. 2004) ("Both Indiana's 1995 statute (applicable to this 
case) and its 1998 statute abandoned strict liability in design defect and failure to warn cases. 
Hence, unlike manufacturing defects, for which manufacturers are still held strictly liable, claims 
of design defect and failure to warn must be proven using negligence principles."); Conley, 2005 
U.S. Dist. LEXIS 15468, at *12-13 ("The IPLA effectively supplants [the plaintiff's] common law 
claims because all of his claims are brought by a user or consumer against a manufacturer for 
physical harm caused by a product. Plaintiffs common law claims will therefore be treated as 
merged into the IPLA claims."); Bourne, 2005 U.S. Dist. LEXIS 15467, at *9 n.2 ("[PJlaintiffs may 
not pursue a separate common law negligence claim [for design defect]. Their negligence claim 
is not dismissed but is more properly merged with the statutory claim under the IPLA, which 
includes elements of negligence."), qff'd, 452 F.3d 632 (7th Cir. 2006); see also Miller v. 
Honeywell Int'l Inc., No. IP 98-1742 C-M/S, 2002 U.S. Dist. LEXIS 20478, at *38 (S.D. Ind. Oct. 
15, 2002), ajfd, 2004 U.S. Dist. LEXIS 15261 (7th Cir. July 26, 2004); Burt v. Makita, USA, Inc., 
212 F. Supp. 2d 893, 899-900 (N.D. Ind. 2002); Birch v. Midwest Garage Door Sys., 790 N.E.2d 
504, 518 (Ind. Ct. App. 2003). 


just as in any other negligence case, a claimant advancing design or warning 
defect theories must satisfy the traditional negligence requirements — duty, 
breach, injury, and causation.^^ 

Despite the IPLA's unambiguous language and several years worth of 
authority recognizing that ''strict liability" applies only in cases involving alleged 
manufacturing defects, some courts unfortunately continue to employ the term 
"strict liability" when referring to IPLA claims, even when those claims allege 
warning and design defects and clearly accrued after the 1995 IPLA amendments 
took effect.^^ That disturbing trend continued in the 2008 survey period, as 
demonstrated by the case of Kovach v. Alpharma, Inc.,^^ in which the parents of 
a child who died from an overdose of codeine following surgery sued the 
manufacturers and sellers of the cup used to dispense the codeine.^^ The Indiana 
Supreme Court granted transfer in Kovach on February 27, 2009. We 
nevertheless analyze the decision in this Survey because the issues involved may 
be important to Indiana judges and practitioners as they await a decision from the 
Indiana Supreme Court. 

In Kovach, the child's parents asserted, among other claims, an IPLA-based 
"strict liability in tort" claim and an IPLA-based "negligence" claim against the 
cup manufacturer and seller.^ ^ The trial court granted summary judgment to the 
cup manufacturer and seller as to each of the claims, presumably because it found 
insufficient evidence to sustain a verdict that the cup was defective and/or 
unreasonably dangerous. ^^ 

Although the Kovach majority opinion indicates that the plaintiffs chose "to 

87. E.g., Conley, 2005 U.S. Dist. LEXIS 15468, at *13-14 ("To withstand summary 
judgment, [the plaintiff] must come forward with evidence tending to show: (1) [the defendant] 
had a duty to warn the ultimate users of its sling that dull or rounded load edges could cut an 
unprotected sling; (2) the hazard was hidden and thus the sling was unreasonably dangerous; (3) 
[the defendant] failed to exercise reasonable care under the circumstances in providing warnings; 
and (4) [the defendant's] alleged failure to provide adequate warnings was the proximate cause of 
his injuries."). 

88. See, e.g., Whitted v. Gen. Motors Corp., 58 F.3d 1200, 1206 (7th Cir. 1995); Burt, 212 
F. Supp. 2d at 900; see also Fellner v. Phila. Toboggan Coasters, Inc., No. 3:05-CV-218-SEB- 
WGH, 2006 WL 2224068, at *1, *4 (S.D. Ind. Aug. 2, 2006); Cincinnati Ins. Cos. v. Hamilton 
Beach/Proctor-Silex, Inc., No. 4:05 CV 49, 2006 WL 299064, at *2-3 (N.D. Ind. Feb. 7, 2006); 
Vaughn v. Daniels Co. (W. Va.), Inc., 841 N.E.2d 1 133, 1 138 (Ind. 2006). 

89. 890 N.E.2d 55 (Ind. Ct. App. 2008), trans, granted, (Ind. Feb. 27, 2009). 

90. Mat 61. 

91. Id. 

92. Id. We presume from the surrounding context that the trial court so found. Because the 
court of appeals described the trial court as having "summarily" granted summary judgment without 
any findings of fact or conclusions of law, id. at 65, the opinion is devoid of specific reasoning for 
the trial court's decision to grant summary judgment. We also note here that the cup manufacturers 
and sellers cross-appealed, arguing that the trial court erred by denying a motion to exclude the 
opinion testimony of plaintiffs' expert witness. Id. at 61. The court's discussion of that issue is 
addressed infra Part I.D. 1 . 

1 108 INDIANA LAW REVIEW [Vol. 42: 1093 

proceed under both the theory of strict liability in tort and negligence,"^^ there is 
no indication in the opinion that the operative theory for proving product defect 
was anything other than failure to warn. The opinion addresses only claims 
alleging failure to wam.^"^ If, indeed, it is true that plaintiffs were not pursuing 
a manufacturing defect theory in the trial court, then there is simply no operative 
theory in the case to which strict liability would have applied because, as noted 
above, Indiana Code sections 34-20-2-1 and 34-20-2-2 make it clear that only 
manufacturing defect theories are subject to strict liability.^^ 

This Survey addresses in detail a handful of cases in which plaintiffs 
attempted to demonstrate products were defective and unreasonably dangerous 
by utilizing warning, design, and manufacturing defect theories. 

1. Warning Defect Theory. — The IPLA contains a specific statutory 
provision covering the warning defect theory, which reads as follows: 

A product is defective ... if the seller fails to: 

(1) properly package or label the product to give reasonable warnings of 
danger about the product; or 

(2) give reasonably complete instructions on proper use of the product; 
when the seller, by exercising reasonable diligence, could have made 
such warnings or instructions available to the user or consumer.^^ 

In failure to warn cases, the "unreasonably dangerous" inquiry is essentially the 
same as the requirement that the defect be latent or hidden.^^ 

Indiana courts have been active in recent years in deciding cases espousing 
warning defect theories. Some of those cases include: Ford Motor Co. v. 

93. Kovach, 890 N.E.2d at 66. 

94. /J. at 66-67. 

95. Although this point is made in more detail below, see infra Part I.D.I, it also bears 
pointing out here that the majority's opinion ultimately concludes that the cup "was defective in its 
design by failing to include a warning." Kovach, 890 N.E.2d at 67. That statement is confusing 
and unfortunate. As described above, failure to warn and improper design are two different 
theories, each of which can be used independently to establish that a product was in a defective 
condition for purposes of the IPLA. Under the IPLA, a product that is judged not to contain an 
appropriate warning is not, by virtue of that fact alone, a defectively designed product. As also 
described below, the elements required in Indiana to prove a design defect theory under the IPLA 
are different from those required to prove a failure to warn theory. 

96. lND.CODE§ 34-20-4-2 (2008); see also Deaton v. Robison, 878 N.E.2d499, 501-03 (Ind. 
Ct. App. 2007), trans, denied, 89 1 N.E.2d 49 (Ind. 2008); Coffman v. PSI Energy, Inc., 815 N.E.2d 
522, 527 (Ind. Ct. App. 2004) (both noting the standard for proving a warning defect case). 

97. See First Nat'l Bank & Trust Corp. v. Am. Eurocopter Corp. {Mow IT), 378 F.3d 682, 
690 n.5 (7th Cir. 2004). For a more detailed analysis oilnlow II, see Joseph R. Alberts, Survey of 
Recent Developments in Indiana Product Liability Law, 38 iND. L. Rev. 1205, 1221-27 (2005). 


Rushfordf^ Tober v. Graco Children's Products, Inc.f^ Williams v. Genie 
Industries, Inc.;^^^ Conley v. Lift-All Co.;^^^ First National Bank & Trust Corp. 
V. American Eurocopter Corp. (Inlow If);^^^ and Birch v. Midwest Garage Door 
Sy stems. ^^^ 

The 2008 survey period revealed that federal and state courts in Indiana are 
as busy as ever when it comes to addressing issues in cases involving allegedly 
defective warnings and instructions. Indeed, three cases are noteworthy here. 

98. 868 N.E.2d 806 (Ind. 2007). For more detailed discussion and commentary about 
Rushford, see Joseph R. Alberts, James Petersen & Robert B. Thomburg, Survey of Recent 
Developments in Indiana Product Liability Law, 41 iND. L. REV. 11 65, 1 184-87 (2008). 

99. 431 F.3d 572 (7th Cir. 2005). For more detailed discussion and commentary about 
Tober, see Joseph R. Alberts & James Petersen, Survey of Recent Developments in Indiana Product 
Liability Law, 40 iND. L. Rev. 1007, 1028-30 (2007). 

100. No. 3:04-CV-217 CAN, 2006 WL 1408412 (N.D. Ind. May 19, 2006). For more detailed 
discussion and commentary about Williams, see Alberts & Petersen, supra note 99, at 1032-33. 

101. No. l:03-cv-01200-DFH-TAB, 2005 U.S. Dist. LEXIS 15468 (S.D. Ind. July 25, 2005). 

102. Inlow II, 378 F.3d 682, affg In re Inlow Accident Litig. {Mow I), No. IP 99-0830-C 
H/K, 2002 U.S. Dist. LEXIS 83 1 8 (S.D. Ind. Apr. 16, 2002). In the Inlow cases, a hehcopter rotor 
blade struck and killed the Conseco general counsel, Lawrence Inlow, as he passed in front of the 
helicopter after disembarking. Id. at 685. Because of the helicopter's high-set rotor blades, the 
court determined as a matter of law that the deceleration-enhanced blade flap was a hidden danger 
of the helicopter and that the manufacturer had a duty to warn its customers of that danger. Id. at 
691. The court ultimately held, however, that the manufacturer satisfied its duty to warn Conseco 
and Inlow as a matter of law in light of the sophisticated intermediary doctrine. Id. at 692-93. 

103. 790 N.E.2d 504 (Ind. Ct. App. 2003). In Birch, a young girl sustained serious injuries 
when the garage door closed on her. Id. at 508. The court concluded that the garage door system 
at issue was not defective and that a change in an applicable federal safety regulation, in and of 
itself, does not make a product defective. Id. at 518. Additionally, the court concluded that there 
was no duty to warn plaintiffs about changes in federal safety regulations because the system 
manual the plaintiffs received included numerous warnings regarding the type of system installed 
and that no additional information about garage door openers would have added to the plaintiffs' 
understanding of the characteristics of the product. Id. at 518-19. For a more detailed analysis of 
Birch, see Joseph R. Alberts & Jason K. Bria, Survey of Recent Developments in Indiana Product 
Liability Law, 37 iND. L. REV. 1247, 1262-64 (2004); see also Burt v. Makita USA, Inc., 212 F. 
Supp. 2d 893 (N.D. Ind. 2002) (rejecting plaintiffs argument that a saw should have had warning 
labels making it more difficult for the saw guard to be left in a position where it appeared installed 
when in fact it was not; the scope of the duty to warn is determined by the foreseeable users of the 
product and there was no evidence that the circumstances of plaintiffs injuries were foreseeable 
such that defendants had a duty to warn against those circumstances); McClain v. Chem-Lube, 759 
N.E.2d 1096 (Ind. Ct. App. 2001) (holding that the trial court should have addressed whether the 
risks associated with use of a product were unknown or unforeseeable and whether the defendants 
had a duty to warn of the dangers inherent in the use of the product, because designated evidence 
showed that both defendants knew that the product at issue was to be used in conjunction with high 
temperatures that occurred as a result of the hot welding process). For a more detailed analysis of 
Burt and McClain, see Alberts & Boyers, supra note 23, at 1183-85. 

1110 INDIANA LAW REVIEW [Vol. 42: 1093 

In the first case, Deaton v. Robison,^^^ a panel of the Indiana Court of Appeals 
affirmed a trial court' s judgment in favor of the manufacturer of a black powder 
rifle that the plaintiff alleged to be defective and unreasonably dangerous. ^^^ 
Plaintiff James Deaton and his friend, Justin Robison, were in Robison's garage 
on December 1, 2002, preparing to go deer hunting. ^^^ Robison owned a black 
powder rifle manufactured by defendant Knight Rifles, Inc.*^^ Robison realized 
that his rifle was still loaded from the previous day's hunt.^^^ Robison 
acknowledged the danger that would be posed by transporting a loaded rifle, 
telling Deaton, "I've got to unload this before I kill somebody. "^^^ As Robison 
tried to unload the rifle, the bolt slipped and it accidentally fired. ^^^ The 
discharged round struck Deaton in the leg.^^* Although the rifle was equipped 
with two safeties, only one of them — a trigger safety — was engaged at the time 
of the shooting.^ ^^ According to the court, "[t]he rifle would not have fired at all 
had both safeties been engaged."^ ^^ 

Deaton and his wife sued both Robison and Knight, "alleging that Robison 
was negligent in shooting Deaton and that Knight was negligent in failing to 
adequately warn of the dangers associated with the [rifle]. "^^"^ At trial, the court 
granted Knight' s motion for judgment on the evidence, concluding that there was 
insufficient evidence to sustain a verdict that Knight's warnings were 
inadequate. ^^^ Specifically, Knight argued that a product must be found to be 
unreasonably dangerous even if there is arguably sufficient evidence to establish 
it was in a defective condition.^ ^^ The Deatons presented two theories at trial to 
show that the rifle's operator's manual was inadequate. First, the Deatons 
contended that the manual failed to warn the user not to let the firing pin rest 
against a live primer.^ ^^ Second, the Deatons asserted that the manual did not 
instruct about how to unload the rifle. ^^^ 

In making its case for judgment on the evidence to the trial court. Knight 
argued that both of plaintiff's theories were subsumed and extinguished because 
the risk of injury from accidental discharging was manifestly apparent to both 

104. 878 N.E.2d 499 (Ind. Ct. App. 2007), trans, denied, 891 N.E.2d 49 (Ind. 2008). 

105. Id. at 500. 

106. Id. 

107. Id. 

108. Id. 

109. Id. 

110. Id. 

111. Id. 

112. Id. 

113. Id. 

114. /^. at 501. 

115. Id. The trial court also "sustained Knight's objection to the admission into evidence of 
a manual and instructional video associated with Robison's rifle." Id. 

116. Mat 502. 

117. /J. at 503-04. 

118. Id. 


Robison and Deaton under the circumstances. ^^^ Moreover, there was ample 
evidence to demonstrate that Robison knew how to unload the rifle because he 
had used it for years and, in fact, when asked if he was "of course aware that if 
[the firing pin] slipped when you were pulling it back without the safety, there 
was a risk of it firing," Robison responded, "Yeah, I . . . I . . . there's always a 
risk."^^^ The evidence at trial demonstrated that if the secondary safety had been 
engaged, "everything would have been fme."^^^ Indeed, Robison agreed both in 
his deposition and in his testimony at trial that the manner in which the rifle was 
stored in his garage — keeping the primer on with the rifle loaded, the projectile 
cap in place, the jacket on with the hammer resting on it — just before Deaton was 
shot was "dangerous."^^^ Robison likewise admitted at trial that trying to remove 
the primer cap without the secondary safety engaged "is a very dangerous thing 
to do," particularly when the rifle was "pointed at someone." ^^^ 

Given that evidence, the trial court agreed with Knight' s argument that "there 
is no need to warn someone if they already know about [the hazard]. A warning 
would be superfluous or meaningless."*^"^ At the conclusion of trial, the jury 
found Robison entirely at fault in causing Deaton' s injuries and awarded the 
Deatons damages. *^^ 

On appeal the Deatons argued that the trial court erred when it entered 
judgment in favor of Knight on the issue of inadequate warnings. *^^ The court, 
in answering the issue, first acknowledged that the case fell "within the 
provisions of the [IPLA]."*^^ The court also pointed out that the IPLA requires 
a plaintiff to prove, among other things, both that a product is defective and 
unreasonably dangerous. *^^ Citing the definition provided by Indiana Code 
section 34-6-2-146, the court recognized that "unreasonably dangerous" refers 
to "any situation in which the use of a product exposes the user or consumer to 
a risk of physical harm to an extent beyond that contemplated by the ordinary 
consumer who purchases the product with the ordinary knowledge about the 

119. /J. at 502-04. 

120. Mat 503. 

121. /J. at 502-03. 

122. Mat 503. 

123. Id. 

124. /J. at 502. 

125. Mat 501. 

126. Id. 

127. Id. Although making it clear initially that the case "falls within the provisions of the 
[IPLA]," the Deaton opinion also indicates that Indiana has "adopted" section 388 of the 
Restatement (Second) of Torts, which seeks to impose common law liability upon possessors of 
defective and unreasonably dangerous chattel. See Deaton, 878 N.E.2d at 501. Whether and to 
what extent section 388 should provide a separate avenue of recovery for the same physical harm 
suffered by the Deatons is addressed infra Part I.E. 

128. Deaton, 878 N.E.2d at 501 (citing Coffman v. PSI Energy, Inc., 815 N.E.2d 522, 527 
(Ind. Ct. App. 2004)). 

1112 INDIANA LAW REVIEW [Vol. 42: 1093 

product's characteristics common to the community of consumers." ^^^ 

As they did in the trial court, the Deatons contended on appeal that the 
dangerous and defective condition the rifle presented was its ability to fire even 
with one of the safeties engaged. ^^^ They also argued that there was "no 
evidence that Robison appreciated the specific danger that the gun could fire 
with the trigger safety engaged."^^^ The court of appeals disagreed, pointing to 
evidence showing that Robison, indeed, "fully appreciated the danger of 
unloading the gun in the presence of others and that he knew engaging the 
secondary safety would have prevented the shooting."^^^ The court continued: 

It is undisputed that Robison appreciated the danger inherent in handling 
a loaded rifle and in unloading a rifle while pointing it at someone . . . 
. If Robison thought the rifle was in a safe condition, loaded, but with the 
single safety engaged, he would not have been so concerned about 
unloading it before leaving for the hunting trip. Immediately before the 
shooting, Robison stated his concern that he might kill someone if he did 
not unload the rifle before the trip. And Robison testified that having a 
loaded firearm "in the condition that [he] had it in when [he] took it out 
of [his] case seconds before Mr. Deaton was shot [namely, with only the 
trigger safety engaged,]" was a "dangerous thing to do." . . . That 
evidence shows that Knight reasonably believed that Robison would 
realize the danger of unloading the rifle while pointing it at someone, 
regardless of whether one or both safeties were engaged. ^^^ 

The court of appeals, therefore, concluded that Knight could not be liable for 
its alleged failure to warn or to provide additional instructions. ^^"^ Simply stated. 

129. Id. (citing IND. CODE § 34-6-2-146 (2008)). 

130. Id. at 503. 

131. Id. 

132. Id. 

1 33. Id. at 503-04 (citation omitted). The evidence also showed that Robison would not have 
heeded the specific warning the Deatons contend Knight should have provided. According to the 
court, "Robison testified that he did not read the manual, and he testified that he probably watched 
the video, but only to learn how to clean the rifle. And, as previously noted, Robison already knew 
it was dangerous to point a loaded weapon at someone and did it anyway." Id. at 504 n.l. 

134. Id. at 504. In the unpublished case of Lind v. Menard, Inc., No. 45A04-0707-CV- 
408, 2008 WL 324018 (Ind. Ct. App. Feb. 7, 2008), another panel of the court of appeals arrived 
at a different conclusion under a different set of facts. In Lind, the customer purchased a drain 
clearing product from Menards. Id. at *1 . The customer read the instructions and warnings on the 
bottle, including the instruction to wear gloves, goggles, and other suitable protective clothing. Id. 
He poured approximately two cups of the drain-clearing product into the drain and waited one hour 
as the label advised. Id. Although the instructions provided that users should allow the product 
to work overnight for best results and to flush the drain with hot water, Lind used warm water from 
the bathroom faucet to try to flush the drain. Id. When the drain did not open, he went to his 
basement to remove the cap from the drum trap. Id. As he did, the cap exploded and Lind suffered 
severe eye injuries, bums, and scarring. Id. The court reversed the trial court's summary judgment 


the rifle did not present an unreasonable or concealed hazard for purposes of the 
IPLA, but rather a manifest and obvious risk that Robison well-contemplated/^^ 
As such, the court of appeals affirmed the trial court's entry of judgment on the 
evidence. ^^^ 

The Deaton decision tracks almost perfectly the principles espoused in a 
2006 Seventh Circuit design defect case. Bourne v. Marty Gilman, Inc.,^^^ In that 
case, the court held that a football goal post that fell and injured a college student 
during a post-game celebration was not unreasonably dangerous as a matter of 
law.^^^ Judge David Hamilton granted summary judgment for the goal post 
manufacturer, determining as a matter of law that the goal post was not 
unreasonably dangerous because it was obvious to an objective, reasonable 
person that a goal post collapsing under the weight of celebrating fans poses a 
risk of serious injury . ^^^ Indeed, the manufacturer' s evidence established that the 
aluminum posts are about forty-feet tall and weigh 470 pounds. ^^^ 

The Bournes appealed to the Seventh Circuit, arguing that the "open and 
obvious" rule cannot bar a claim for defective design under the IPLA, even if a 
risk is obvious, if they could prove that the goal post manufacturer should have 
adopted a safer and feasible alternative design. ^"^^ The Seventh Circuit ultimately 
agreed that Judge Hamilton's ruling was sound, although it found it more 
accurate to state that the goal post was not unreasonably dangerous as a matter 
of law, rather than declaring that the danger posed by it was "obvious as a matter 
of law."^"^^ In doing so, the Seventh Circuit made it clear that the case examined 
whether the product was defective and unreasonably dangerous as a matter of 
law, not whether the "incurred risk" defense applied as a matter of law.'"^^ This 
is an important distinction because the extent to which a product' s risk is "open" 
or "obvious" is a critical element in determining both the reasonableness of the 
danger it presents, and the degree to which a user actually knew of the product's 
danger. ^"^"^ The former, and not the latter, determination was at issue in Bourne. ^"^^ 

for the defendant even though the label warned about the danger of severe bums. Id. at *6. The 
court reached its decision largely because Lind wore glasses, waited one hour for the product to 
work before taking action, and did something that the label did not specifically warn him against. 
Id. Under those circumstances, the panel concluded that a jury was entitled the determine the 
adequacy of the warnings and instructions. Id. 

135. Deaton, S7^N.E.2d at 504. 

136. Id. 

137. 452 F.3d 632 (7th Cir. 2006). For a complete discussion of Bourne, see Alberts & 
Peterson, supra note 99, at 1022-26. 

138. fioMm^, 452 F.3d at 633, 638-39. 

139. Mat 634-35. 

140. Id. at 633. 

141. Mat 635. 

142. Id. at 631. 

143. Id. 

144. Id. 

145. Id. 

1 1 14 INDIANA LAW REVIEW [Vol. 42: 1093 

Practitioners and judges in Indiana, therefore, should be mindful that 
application of the "open and obvious" concept can be used in at least two 
different ways: (1) in determining whether a product is "unreasonably 
dangerous" because unreasonable danger depends upon the reasonable 
expectations of expected users and the obviousness of the risk will eliminate the 
need for any further protective measures; ^"^^ and (2) in determining whether the 
"incurred risk" defense^"^^ applies. Practitioners and judges in Indiana should also 
recognize that Deaton and Bourne analyzed the openness and obviousness of a 
product's condition and ultimately concluded, as a matter of law, that the 
products at issue did not present an unreasonable, concealed hazard. Whether the 
same decision would have been reached as a matter of law in the context of the 
"incurred risk" statutory defense is a more difficult question because the defense 
requires a defendant to establish that the user actually knew about the product's 
danger. ^"^^ No such requirement exists when the "open and obvious" concept is 
used to support the argument that a product is not unreasonably dangerous 
because of the open and obvious nature of the danger it presents. The latter is 
based upon a "reasonable user expectation" standard, not an actual knowledge 

The second of the three significant 2008 cases involving allegedly defective 
warnings and instructions is the federal district court decision in Clark v. 
Oshkosh Truck Corp}^^ Clark involved a plaintiff, Jimmy Clark, who worked 
as a repossession agent. Clark suffered injuries while trying to repossess a 
vehicle. ^^^ The injuries occurred on December 12, 2005, at a time when there 
was freezing rain and ice on the ground. ^^* Clark slipped while walking on the 
raised rollback bed of the truck he used to repossess vehicles, caught his foot in 
an open-sided rail, and tumbled over the side of the truck. ^^^ The truck had been 
exposed to the elements, but Clark said that he did not need to shovel or remove 
snow, ice, or water from the truck bed.^^^ 

Clark had worked as a repossession agent for four-and-a-half years and had 
experience using rollback trucks similar to the one he used on the day of the 
injury. ^^"^ The truck at issue had slick beds and open-sided rails because those 
were the specifications that Clark's employer requested when it purchased the 
vehicle. ^^^ Before December 12, 2005, Clark had slipped and fallen on the 




Ind. Code § 34-20-6-3 (2008). 


Id. §§ 34-20-6-3(1 )-(2). 


No. 1 :07-cv-013 1-LJM-JMS, 2008 WL 2705558, Prod. Liab. 


Ind. July 

10, 2008). 














truck's bed on two other occasions, but had not suffered any injuries. *^^ 

The operator's manual and safety video included with the truck at issue 
instructed users not to drive a vehicle onto the inclined bed.^^^ Those materials 
did not provide any warning against walking on the truck bed, nor did they 
specify how to unload small vehicles. ^^^ Regardless, Clark never read the 
operator's manuals, nor did he observe any of the instructional materials for any 
of the vehicles he used.^^^ He did, however, receive on-the-job training about the 
operation of rollback bed trucks from co-workers, who told Clark "to tie down 
all four comers of a vehicle being towed and to set the parking brake before 
transporting the vehicle."^^^ Clark's regular practice was to drive the vehicle to 
be towed up the inclined ramp, ^^^ Clark' s training also advised that both the front 
"tie downs" and the parking brake had to be released before unloading a 
vehicle. *^^ According to Clark, "there was no way to release the front tie downs 
or the parking brake when unloading the vehicle without walking on the inclined 
bed, particularly if the towed vehicle was a small vehicle."'^^ 

Clark and his wife filed suit against the manufacturer of the rollback truck, 
collectively referred to in the court's decision as "Jerr-Dan."*^"^ Plaintiffs 
presented two theories under the EPLA. First, plaintiffs asserted that Jerr-Dan 
"failed to warn of the dangers associated with walking on the rollback bed"^^^ 
and, second, they contended that Jerr-Dan "failed to provide adequate 
instructions [about] how to operate the rollback bed, especially when the operator 
is of average size and the vehicle is a mid-size or small." ^^^ 

Jerr-Dan moved for summary judgment, arguing that the rollback truck was 
not unreasonably dangerous because the danger posed to Clark was open and 
obvious.^^^ Citing to IPLA sections 34-20-2-1, 2-3, 4-1, and 4-2, the court 
initially recognized that the IPLA governed plaintiffs' substantive claims 
regardless of their legal theories and reiterated that the operative theory alleged 
that the truck was defective because it did not provide adequate warnings or use 
instructions.'^^ The court also recognized that the IPLA requires a plaintiff to 
prove that: "(1) the product was defective and unreasonably dangerous; (2) the 
defective condition existed at the time the product left the defendant's control; 
and (3) the defective condition was the proximate cause of the plaintiff's 

156. Id. 

157. Id. at *2. 

158. Id. 

159. Id.siH. 

160. Id. 

161. Id. 

162. Id.dXn. 

163. Id. 

164. M at*l. 

165. Mat*4. 

166. Id. 

167. Id. 

168. Id. at *3. 

1116 INDIANA LAW REVIEW [Vol. 42: 1093 

injuries."^^^ As noted above and as Judge McKinney pointed out, the 
"'reasonable consumer expectation'" analysis posits that '"a product may be 
defective under the [IPLA] where the manufacturer fails in its duty to warn of a 
danger or instruct on the proper use of the product as to which the average 
consumer would not be aware.'" *^^ For purposes of the application of the IPLA, 
a product is unreasonably dangerous when it "'exposes the user or consumer to 
a risk of physical harm to an extent beyond that contemplated by the ordinary 
consumer who purchases the product with the ordinary knowledge about the 
product's characteristics common to the community of consumers. '"^^^ 

The court granted Jerr-Dan's motion with regard to the failure to warn 
theory, concluding that Jerr-Dan "had no duty to warn of any dangers associated 
with the rollback bed's open and obvious conditions. "^^^ Clark's prior 
knowledge about and experience with the type of rollback bed at issue were key 
to the court's decision. Indeed, the court noted that Clark was personally aware 
of the "slick nature" of the rollback bed, having compared the bed to glass and 
having twice complained about its sHppery surface. ^^^ Clark argued that "the 
open and obvious defense [did not] apply because although he knew the bed was 
slick, he did not expect to fall after he slipped and got his foot stuck under the 
rail."^^"^ The court rejected that argument, determining that "the specific 
mechanics" of Clark's fall were "irrelevant because of the plainly visible 
characteristics of the rollback bed, which [Clark] recognized." ^^^ 

169. Id. (citing Deaton v. Robison, 878 N.E.2d 499, 501 (Ind. Ct. App. 2007), trans, denied, 
891 N.E.2d 49 (Ind. 2008)). The court also aptly noted that the "defective condition" analysis 
'"focuses on the product itself" while the "unreasonably dangerous" analysis "'focuses on the 
reasonable expectations of the consumer.'" Id. (quoting Welch v. Scripto-Tokai Corp., 65 1 N.E.2d 
810, 814 (Ind. Ct. App. 1995)). 

170. Id. at *4 (quoting Ford Motor Co. v. Rushford, 868 N.E.2d 806, 810 (Ind. 2007)). Citing 
IPLA section 2-2), the Clark court also pointed out that actions alleging design defect or failure to 
warn as the operative theory to prove defectiveness '"must establish that the manufacturer or seller 
failed to exercise reasonable care under the circumstances in designing the product or in providing 
the warnings or instructions.'" Id. (quoting iND. CODE § 34-20-2-2 (2008)). 

171. M (quoting Ind. Code §34-6-2-146 (2008)). 

172. Id. 

173. Id. 

174. Id. 

175. Id. It is worth mentioning that Judge McKinney chose to write that the "open and 
obvious danger rule applies in products liability claims based on common law negligence." Id. at 
(citing Welch v. Scripto-Tokai Corp., 651 N.E.2d 810, 815 (Ind. Ct. App. 1995)). That is a correct 
statement of Indiana law from an historical standpoint. Indeed, the case to which the Clark court 
cites (Welch) was decided at a time when Indiana common law provided a separate avenue for 
pursuing failure-to-wam claims alleging physical harm caused by a product. It is important to point 
out here that the "open and obvious" danger doctrine is technically no longer a "defense" and 
practitioners should take care not to apply it in the same manner as it had been applied before the 
1995 amendments to the IPLA merged all failure-to-wam claims into the IPLA, thereby 
extinguishing all separate common law failure-to-wam theories for physical harm caused by a 


According to the court, that analysis did not end the inquiry because the 
plaintiffs also contended that Jerr-Dan failed to provide adequate instructions 
about the proper and safe use of the rollback bed.^^^ With regard to that theory, 
the court denied Jerr-Dan' s summary judgment motion, concluding that plaintiffs 
had, indeed, designated enough evidence to present their inadequate use 
instruction theory to the jury.^^^ The court pointed to several things that Jerr- 
Dan' s safety video did not address, including: (1) how the winch should be 
"unwound from its original position"; (2) "how the parking brake [should be] set 
on a vehicle after it is loaded on the bed"; (3) "how the front tie downs are 
affixed"; and (4) how each of those procedures should be accomplished when 
unloading a vehicle from the truck. ^^^ According to the court, Jerr-Dan did not 
offer any additional arguments specific to the failure-to-instruct theory, but rather 
argued that all of plaintiffs' claims fail because any dangers associated with the 
use of the rollback bed and truck were open and obvious. '^^ In rejecting such an 
argument, the court concluded as follows: 

[E]ven if the Court concludes that no features of the rollback bed or 
truck were concealed, a reasonable jury could still find that an average 
consumer would not be aware of how to safely perform certain required 
tasks absent adequate instructions, particularly when a person of average 
stature attempts to load or unload a mid-size or small vehicle. As such, 
a reasonable jury could fmd that Jerr-Dan' s inadequate instructions 
rendered the rollback bed and truck defective and unreasonably 
dangerous to an average consumer .... After reviewing both the safety 
video and operations manual, the Court concludes that the Plaintiffs have 
presented sufficient evidence to suggest that Jerr-Dan' s rollback bed and 
truck were defective under Indiana Code [section] 34-20-4-2.^^^ 

Clark may prove troublesome to those trying to interpret and apply it because 
the decision allowed the plaintiffs to proceed to trial on a failure-to-instruct 
theory despite having made an initial determination that the slippery truck bed 
and the risk of falling on it was obvious and did not present an unreasonably 
dangerous condition. As noted above, in cases alleging improper design or 
inadequate warnings as the theory for proving that a product is in a "defective 
condition," recent decisions have adopted an approach in which that the 
substantive defect analysis — whether a design was inappropriate or whether a 
warning was inadequate — follows a threshold analysis that first examines 
whether, in fact, the product at issue is "unreasonably dangerous." ^^^ 


176. /J. at*5. 

177. Id. 

178. Id. 

179. Id. 

180. /fif. (citations omitted). 

181. Indeed, in Bourne v. Marty Gilman, Inc. , No. 1 :03-cv-01 375-DFH-VSS, 2005 U.S. Dist. 
LEXIS 15467 (S.D. Ind. July 20, 2005), qff'd, 452 F.3d 632 (7th Cir. 2006) (involving an alleged 

1118 INDIANA LAW REVIEW [Vol. 42: 1093 

In Clark, there is little doubt that the slick surface of the rollback truck's bed 
was the defective condition from which the truck at issue suffered. There seems 
likewise little doubt that such a condition would have existed under the 
circumstances even had Jerr-Dan provided a set of instructions about the proper 
use of the rollback bed and truck. Either they would have instructed users not to 
walk on the bed (which would have rendered Clark's actions a "misuse") or they 
presumably would have provided that the user must walk carefully on the bed so 
as to make the proper adjustments to the vehicle being repossessed. Regardless, 
the condition of which Clark complained — the slippery bed — would have been 
unavoidable absent a different set of weather conditions. 

The IPLA and recent case law interpreting it seem to suggest that the better 
approach for courts to take is to first determine whether the defective condition 
from which the product allegedly suffers would, as a matter of law and under all 
relevant circumstances, thereby also render it unreasonably dangerous. ^^^ If not, 
the inquiry should be at an end even if it is possible that a plaintiff could present 
sufficient evidence to defeat a summary judgment concerning whether the 
product could be said to be in a "defective condition."^^^ In that context, the 
Clark decision is peculiar because it reaches the conclusion that the defective 
condition (the slippery rollback bed) does not render the truck unreasonably 
dangerous as a matter of law (in light of Clark' s prior knowledge and experience 
with it and the open and obvious nature of the risk presented), yet the court 
nevertheless resurrected plaintiffs' claim merely because there was arguably 
sufficient evidence to demonstrate that Jerr-Dan' s use instructions could have 
been better. ^^"^ Following the letter of the IPLA, the jury could find that the truck 
was in a defective condition, but the court's previous ruling as a matter of law 
that Clark's knowledge of the open and obvious danger renders the truck not 
unreasonably dangerous, which, in turn, means that plaintiffs cannot recover. 

The Clark court determined that "the specific mechanics" of Clark's fall 
were "irrelevant because of the plainly visible characteristics of the rollback bed, 
which [Clark] recognized."^^^ Under the circumstances and following the precise 
letter of the IPLA, the specific theory employed by Clark to prove that the truck 
was in a defective condition should likewise be irrelevant if that condition and 
the risk it presented already have been determined as a matter of law not to 
present an unreasonably dangerous condition. 

The third significant warnings defect case decided during the 2008 survey 
period is Kovach v. Alpharma, Inc}^^ We briefly mentioned Kovach earlier in 

design defect) and Conley v. Lift-All Co., No. l:03-cv-01200-DFH-TAB, 2005 U.S. Dist. LEXIS 
15468 (S.D. Ind. July 25, 2005) (involving an alleged warnings defect), Judge Hamilton followed 
such an approach. 

182. E.g., Bourne v. Marty Oilman, Inc., 452 F.3d 632 (7th Cir. 2006). 

183. Id. 

184. C/arit, 2008 WL 2705558, at *4-5. 

185. Mat*4. 

186. 890 N.E.2d 55 (Ind. Ct. App. 2008), trans, granted, (Ind. Feb. 27, 2009). 


this Article ^^^ because the majority opinion appears to embrace the idea that strict 
liability attaches to failure to warn theories despite unambiguous language to the 
contrary in the IPLA.^^^ Putting aside that issue for the sake of this discussion, 
the majority's substantive treatment of the failure to warn claim deserves 
separate and detailed attention. As noted above, we recognize that the Indiana 
Supreme Court granted transfer on Kovach on February 27, 2009. As of the date 
of publication of this Survey, the Indiana Supreme Court has not issued a 

In Kovach, a nine-year-old boy was admitted to an ambulatory surgery center 
for a scheduled adenoidectomy.'^^ After the procedure, while recovering in the 
Post- Anesthesia Care Unit, a nurse gave the boy Capital of Codeine, an opiate. ^^^ 
Later in the day, after being discharged from the surgery center, the boy went 
into respiratory arrest and was transported to a hospital where he tragically died 
from asphyxia attributed to an opiate overdose. ^^^ 

The nurse administering the Capital of Codeine used a graduated, 
translucent, but not entirely clear, medicine cup.^^^ The cup possessed 
measurement marks on its inside representing milliliters (ml), drams, ounces, 
teaspoons, tablespoons and cubic centimeters. ^^^ These interior measurement 
marks possessed similar translucency to that of the measuring cup.^^"^ The young 
boy was prescribed 15 ml of Capital of Codeine, which was one half of the 
cup.*^^ The administering nurse claimed that she gave the boy 15 ml of the drug 
as prescribed, but the child's father testified that the 30 ml cup used to dispense 
the opiate was full when the nurse entered the room and the boy dran